Darden Restaurants recently announced its plans to acquire Ruth’s Hospitality Group. In particular, Darden Restaurants is known for owning Olive Garden and LongHorn Steakhouse. Ruth’s Hospitality Group is also in the restaurant business, owning Ruth’s Chris Steak House. Actually, the entire transaction is valued at $715 million. So, here’s what you need to know:
Darden Restaurants: The Details
The deal should go through in June, as long as the government gives its approval. Ruth’s Hospitality Group is active in 154 locations and has more than $860 million of annual sales. With the acquisition, Darden expects to add 5,000 employees to its workforce. The company anticipates pre tax revenues of $5 million to $10 million in the first year. In the second year they expect $15 million to $20 million after the deal closes. So, the acquisition is expected to add 10 to 12 cents to Darden’s diluted net earnings per share (Diluted EPS.)
Implications for Darden Restaurants
The acquisition of Ruth’s Hospitality Group will expand Darden’s presence in the restaurant business. Darden’s current portfolio includes more casual dining brands. Brands like Olive Garden, LongHorn Steakhouse, and Bahama Breeze. Ruth’s Chris Steak House, on the other hand, is known for its high-end steaks and fine dining experience. By acquiring Ruth’s Hospitality Group, Darden can diversify its portfolio and appeal to a wider range of diners.
In addition, the acquisition is expected to generate significant cost savings for Darden. These cost savings will come from various sources including supply chain efficiencies, shared services, and other operational synergies.
Implications for Ruth’s Hospitality Group
For Ruth’s Hospitality Group, the acquisition provides access to Darden’s vast resources and expertise. With the support of Darden, Ruth’s Chris Steak House can expand and accelerate its growth. The acquisition also offers significant financial benefits for Ruth’s Hospitality Group shareholders. Following the announcement, Ruth’s Hospitality Group shares rose 34%.
In a Nutshell
The acquisition of Ruth’s Hospitality Group by Darden Restaurants is a strategic move and it should benefit both companies. For Darden, the acquisition provides an opportunity to diversify its portfolio and expand its presence. Especially in the upscale dining segment. For Ruth’s Hospitality Group, the acquisition offers access to Darden’s resources. Resources such as expertise, as well as significant financial benefits for its shareholders. Therefore, the deal is expected to be completed in June, depending on regulatory approvals.