May 4, 2023: On Wednesday, Darden Restaurants said that it is buying Ruth’s Hospitality Group, the parent firm of Ruth’s Chris Steak House, for $715 million.
The deal importance Ruth’s at $21.50 for each share in an all-cash transaction. The steakhouse has over 150 places worldwide and will take $505.9 million in earnings in 2022.
Ruth’s claims spiked almost 34% in premarket trading after closing Tuesday at about $16 for each share. Darden’s stock was flat.
Ruth will join Darden’s fine-dining portfolio, including The Capital Grille and Eddie V’s. In Darden’s numerous recent quarters, its fine-dining eatery reported a same-store sales increase of 11.7%. The segment’s average weekly sales had over doubled compared to pre-pandemic levels.
The steakhouse is Darden’s initial acquisition in six years. It bought Cheddar’s Scratch Kitchen in 2017 for $780 million. CEO Rick Cardenas signalled in January that the company wanted to add a 10th chain to its portfolio for the right price.
The agreement breaks a drought for hotel deal-making. Rising interest prices have made acquisitions more expensive.
On top of that, many restaurant companies such as Yum Brands and Restaurant Brands International instead focused on turning all over the laggards in their portfolios and expanding their newer chains. A turbulent products market, inflation and concerns about a slump have also kept some restaurant chains from going public.
But one big deal is anticipations on the horizon, the increasing sale of Subway. The sandwich chain reportedly seeks at least $10 billion to end more than five decades of family ownership.
Darden’s acquisition of Ruth’s precedes the steakhouse’s initial-quarter earnings report, expected to be released before the bell Friday. The company said it was cancelling the scheduled forum call that morning.
Last quarter, Ruth’s reported same-store sales increases of 4.5%.
Darden expects that acquisition and integration expenses will cost the company between $55 million and $60 million. But it anticipates $5 million to $10 million in pretax synergies in the initial year and an additional $15 million to $20 million in the next year.
The deal is anticipated to close in June if customary closing conditions are met. Ruth’s CEO, Cheryl Henry, will stay president of Ruth’s Chris and report to Cardenas.
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