ORLANDO, Fla. - Darden Restaurants, Inc. (NYSE:DRI), the owner of popular chains such as Olive Garden and LongHorn Steakhouse, announced the completion of its purchase of Chuy's Holdings (NASDAQ:CHUY), Inc., a Tex-Mex restaurant group, in a deal valued at around $605 million. The all-cash acquisition, which was finalized today, was approved by the majority of Chuy's stockholders on October 10, 2024.
The acquisition was funded through a mix of senior notes offerings, which Darden issued on October 3, 2024. The offerings included $400 million of 4.350% senior notes due in 2027 and $350 million of 4.550% senior notes due in 2029.
Chuy's, known for its authentic, made-from-scratch Tex-Mex cuisine, adds over 100 restaurants across 15 states to Darden's expanding portfolio. Each Chuy's restaurant is designed to have a unique look and atmosphere, aligning with the brand's motto, "If you've seen one Chuy's, you've seen one Chuy's." The acquisition marks the end of Chuy's Holdings' common stock trading on the Nasdaq.
The purchase of Chuy's Holdings is part of Darden's strategy to diversify its restaurant offerings. Darden's portfolio now includes a variety of dining experiences, ranging from casual to fine dining, with brands such as The Capital Grille, Seasons 52, Eddie V's, and Bahama Breeze, among others.
This move could potentially strengthen Darden's market position by broadening its customer base and geographic reach. The financial details of the transaction indicate a strategic investment by Darden, leveraging debt instruments to finance the acquisition.
The information provided in this article is based on a press release statement from Darden Restaurants, Inc.
In other recent news, Darden Restaurants reported a modest 1% increase in sales, totaling $2.8 billion, but earnings per share (EPS) fell short of expectations, coming in at $1.75. Despite this, the company reaffirmed its full-year financial guidance. In addition, Darden announced strategic partnerships and acquisitions, such as a collaboration with Uber (NYSE:UBER) for delivery services and the planned acquisition of Chuy's.
Several financial firms have adjusted their outlook on Darden Restaurants following these developments. Stifel maintained a Buy rating and a $190 price target, citing Darden's strategies to increase customer visits and the potential benefits of the Uber partnership. KeyBanc Capital Markets raised its price target for Darden to $194, while BMO Capital Markets and Raymond James increased their price targets to $175 and $187, respectively. TD Cowen expressed cautious optimism with a new price target of $165.
Jefferies maintained an Underperform rating but raised the price target to $136, expressing skepticism about the effectiveness of the new delivery initiative. Evercore ISI upgraded Darden's stock to "Outperform" and raised its target to $205, reflecting an optimistic view of the company's future performance. These adjustments reflect the various perspectives of financial firms on the company's recent performance and strategic initiatives.
InvestingPro Insights
As Darden Restaurants completes its acquisition of Chuy's Holdings, it's worth examining some key financial metrics and insights from InvestingPro that shed light on Darden's current position and future prospects.
According to InvestingPro data, Darden boasts a market capitalization of $18.32 billion, reflecting its significant presence in the restaurant industry. The company's P/E ratio stands at 17.88, suggesting that investors are willing to pay a premium for Darden's earnings, possibly due to its growth potential and market position.
One InvestingPro Tip highlights that Darden has maintained dividend payments for 30 consecutive years, demonstrating a strong commitment to shareholder returns. This consistency aligns well with the company's strategic moves, such as the Chuy's acquisition, which aims to enhance long-term value for investors.
Another relevant InvestingPro Tip indicates that Darden has been profitable over the last twelve months, with a revenue of $11.42 billion and an operating income margin of 11.74%. These figures suggest that the company has a solid financial foundation to support its expansion strategy, including the recent $605 million acquisition of Chuy's.
It's worth noting that InvestingPro offers additional tips and insights for Darden Restaurants, with 9 more tips available to subscribers, providing a more comprehensive analysis of the company's financial health and market position.
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