Darden Restaurants, the owner of Olive Garden and LongHorn Steakhouse, is venturing into the Tex-Mex dining sector with its $605 million deal to acquire Chuy's Holdings, a chain with 101 eateries.
Orlando, Florida-based Darden on Wednesday said it had struck a definitive agreement to purchase Chuy's, which is headquartered in Austin, Texas, for $37.50 a share in an all-cash transaction. In a statement, Darden said that Chuy's would complement a portfolio that includes not only Olive Garden and LongHorn Steakhouse but also Yard House, Ruth's Chris Steak House, Cheddar's Scratch Kitchen, The Capital Grille, Seasons 52, Eddie V's and Bahama Breeze.
The pending deal comes roughly a year after Darden expanded its holdings by purchasing Ruth's Chris, a fine-dining chain with 80 restaurants, for $715 million. Darden reported a relatively soft fiscal fourth quarter, the period ended May 26, with consolidated same-restaurant sales flat, and down 1.5% at Olive Garden and up 4% at LongHorn. Overall sales rose about 7% to $2.96 billion, including the Ruth's Chris sites and 27 new restaurants, compared with $2.77 billion in the prior-year period.
The latest transaction is slated to be completed in Darden's fiscal second quarter.
Chuy's, founded in 1982, owns and operates full-service restaurants serving Tex-Mex-inspired dishes. Its locations span 15 states, and in the 12 months ended March 31 it generated total revenue over $450 million, and average annual restaurant volume of $4.5 million.
"Chuy's is a differentiated brand within the full-service dining industry with strong performance and growth potential," Darden President and CEO Rick Cardenas said in a statement. "Based on our criteria for adding a brand to the Darden portfolio, we believe Chuy's is an excellent fit that supports our winning strategy. "
The purchase price represents a 10.3 implied multiple of Chuy's latest 12 months ended March 31, of earnings before interest, taxes, depreciation and amortization, according to Darden.
The company, which has about 2,000 restaurants overall, said it expects pretax net synergies from the Chuy's acquisition of about $15 million by the end of its fiscal 2026.
The definitive merger agreement includes a 30-day "go-shop" period that will allow Chuy's to solicit alternative proposals from interested parties.
For the Record
BofA Securities is acting as financial adviser, and Hunton Andrews Kurth is acting as legal adviser to Darden. Piper Sandler is acting as financial adviser, and Winston & Strawn is acting as legal adviser to Chuy's.