Darden Restaurants, the parent company of popular chains like Olive Garden and LongHorn Steakhouse, has announced its acquisition of the Tex-Mex chain Chuy’s for a staggering $605 million. This move marks Darden’s expansion into the Tex-Mex dining sector.
The deal involves Darden acquiring all outstanding shares of Chuy’s at $37.50 per share, a significant premium compared to the closing price of $25.27 per share before the announcement. The acquisition has been unanimously approved by the boards of both Darden and Chuy’s and is expected to be finalized later this year, pending shareholder approval.
Chuy’s Holdings Inc., founded in Austin, Texas, in 1982, currently operates 101 restaurants across 15 states and employs 7,400 individuals. Known for its unique decor and fresh offerings such as handmade tortillas and sauces, Chuy’s has carved a niche in the restaurant industry.
Darden, headquartered in Orlando, Florida, manages over 1,900 restaurants and a workforce of 190,000 employees. With popular brands like Ruth’s Chris Steak House and The Capital Grille under its umbrella, Darden sees the acquisition of Chuy’s as a strategic move to diversify its dining options.
According to Darden President and CEO Rick Cardenas, Chuy’s is a strong brand with substantial growth potential that aligns with Darden’s expansion strategy. Similarly, Chuy’s Chairman and CEO Steven Hislop expressed optimism about the acquisition, stating that it will propel Chuy’s business objectives and introduce the brand to new communities.
Both Darden and Chuy’s have faced challenges in recent months due to a decline in customer traffic attributed to inflation concerns. Darden reported flat same-store sales in its fourth fiscal quarter, while Chuy’s experienced a 5% drop in same-store sales in its first quarter.
The acquisition of Chuy’s by Darden comes amidst a competitive landscape in the restaurant industry, with fast-food chains like McDonald’s intensifying price promotions. Investment bank Jefferies recently downgraded shares of both Darden and Chuy’s, citing pressure from the fast-food segment.
