Olive Garden owner Darden agrees to buy Chuy’s for $605 million

Darden Restaurants Inc., parent company of such casual dining chains as Olive Garden, LongHorn Steakhouse and Cheddar’s Scratch Kitchen, has agreed to buy Chuy’s Holdings Inc. for $605 million, the company said Wednesday.

Darden is headquartered in Orlando, Florida, which recently acquired the fine dining restaurant Ruth’s Chris Steak House a year ago and Austin, Texas-based Chuy’s said the deal would see Darden acquire all outstanding shares of Chuy’s for $37.50 per share.

“Chuy’s will complement Darden’s portfolio of iconic brands, which currently includes Olive Garden, LongHorn Steakhouse, Yard House, Ruth’s Chris Steak House, Cheddar’s Scratch Kitchen, The Capital Grille, Seasons 52, Eddie V’s and Bahama Breeze,” Darden said.

Chuy’s, founded in Austin in 1982, owns and operates full-service restaurants serving Tex-Mex-inspired cuisine. As of June 16, Chuy’s had 101 restaurants in 15 states. For the 12 months ended March 31, Chuy’s generated more than $450 million in total revenue and average annual restaurant sales of $4.5 million.

“Chuy’s is a distinctive brand in the full-service restaurant industry with strong performance and growth potential,” Rick Cardenas, Darden president and CEO, said in a statement.

“Based on our criteria for adding a brand to the Darden portfolio, we believe Chuy’s is an excellent fit for our winning strategy,” said Cardenas. “I am excited to welcome 7,400 team members to Darden and diversify the Darden portfolio into a new foodservice category.”

Steven Hislop, chairman, CEO and president of Chuy, added: “We are excited to join the Darden family and its portfolio of respected brands.”

Darden said the purchase price of $37.50 per share represented an approximately 40% premium to its 60-day volume-weighted average price.

The purchase price represents 10.3 times Chuya’s implied earnings before interest, taxes, depreciation, and amortization for the trailing 12 months ended March 31, Darden said.

The transaction is expected to close in the second quarter of Darden’s fiscal year.

BofA Securities acted as financial advisor and Hunton Andrews Kurth LLP acted as legal advisor to Darden. Piper Sandler acted as financial advisor and Winston & Strawn LLP acted as legal advisor to Chuy’s.

Darden’s net income was $308.1 million, or $2.57 per share, for the fourth quarter ended May 26, down from $315.1 million, or $2.58 per share, in the same period a year earlier. Sales were $2.957 billion, compared with $2.769 billion in the year-ago quarter, reflecting the addition of 80 Ruth’s Chris Steak Houses acquisitions and 37 new restaurants.

Same-store sales for consolidated Darden were flat at 0%, with Olive Garden down 1.5% and LongHorn Steakhouse up 4%. Fine dining was down 2.6% and other businesses were down 1.1%.

As of May 26, Darden had 2,031 restaurants in operation, including 920 Olive Gardens, 575 LongHorns, 181 Cheddar’s Scratch Kitchens, 88 Yard Houses, 80 Ruth’s Chris steak houses, 66 Capital Grills, 44 Seasons 52s, 43 Bahama Breezes, 30 Eddie V’s and four Capital Burgers.

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