Olive Garden owner Darden Restaurants buys Ruth’s Chris Steak House for $715 million

A pedestrian sporting a protecting masks walks previous a Ruth’s Chris restaurant in Washington, D.C., on Monday, April 20, 2020.

Andrew Harrer | Bloomberg by way of Getty Photos

Darden Restaurants mentioned Wednesday it’s shopping for Ruth’s Hospitality Group, the mother or father firm of Ruth’s Chris Steak Home, for $715 million.

The deal values Ruth’s at $21.50 per share in an all-cash transaction. The steakhouse has greater than 150 places worldwide and generated $505.9 million in income in 2022.

Ruth’s shares spiked practically 34% in premarket buying and selling, after closing Tuesday at about $16 per share. Darden’s inventory was flat.

Ruth’s will be a part of Darden’s fine-dining portfolio, which already contains The Capital Grille and Eddie V’s. In Darden’s most up-to-date quarter, its fine-dining eating places reported same-store gross sales progress of 11.7%. The phase’s common weekly gross sales had greater than doubled in contrast with pre-pandemic ranges.

The steakhouse is Darden’s first acquisition in six years. It purchased Cheddar’s Scratch Kitchen in 2017 for $780 million. CEO Rick Cardenas signaled in January that the corporate was trying so as to add a tenth chain to its portfolio, for the precise worth.

Darden plans to carry a convention name Thursday at 8:30 a.m. ET to debate the deal.

The settlement breaks a drought for restaurant deal-making. Rising rates of interest have made acquisitions dearer.

On high of that, many restaurant giants akin to Yum Manufacturers and Restaurant Manufacturers Worldwide have as an alternative targeted on turning across the laggards of their portfolios and increasing their newer chains. A turbulent inventory market, inflation and considerations a couple of recession have additionally stored some restaurant chains from going public.

However one large deal is anticipated on the horizon: the upcoming sale of Subway. The sandwich chain is reportedly searching for no less than $10 billion to finish greater than 5 a long time of household possession.

Darden’s acquisition of Ruth’s precedes the steakhouse’s first-quarter earnings report, which is anticipated to be launched earlier than the bell Friday. The corporate mentioned Wednesday it’s canceling the convention name scheduled for that morning.

Final quarter, Ruth’s reported same-store gross sales progress of 4.5%.

Darden expects that acquisition and integration bills will value the corporate between $55 million and $60 million. However it additionally anticipates $5 million to $10 million in pretax synergies within the first yr and an extra $15 million to $20 million within the second yr.

The deal is anticipated to shut in June if customary closing situations are met. Ruth’s CEO Cheryl Henry will keep on as president of Ruth’s Chris and report back to Cardenas.

Ruth’s Chris was based in 1965 after Ruth Fertel purchased Chris Steak Home in New Orleans. The phrases of the sale stored her from reusing the title at different places, so she selected to call new places Ruth’s Chris Steak Home. The corporate went public in 2005.

As of Tuesday’s shut, Darden’s inventory had risen practically 10% this yr, giving it a market worth of $18.4 billion. Ruth’s shares had elevated 3% this yr as of Tuesday, bringing its market worth as much as $525 million.

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