Darden Restaurants, the parent of Olive Garden, LongHorn Steakhouse and other casual-dining brands, is acquiring Chuy’s Tex-Mex for $605 million in cash, the company announced Wednesday.
The 101-unit, Austin-based Chuy’s is known for its scratch-made Tex-Mex cuisine and the funky, eclectic atmosphere of its restaurants. It will be the first Mexican chain in Darden’s portfolio. Chuy’s owns and operates all of its restaurants, which aligns with Darden’s operating philosophy.
“Chuy's is a differentiated brand within the full-service dining industry with strong performance and growth potential," said Darden President and CEO Rick Cardenas in a statement. "Based on our criteria for adding a brand to the Darden portfolio, we believe Chuy's is an excellent fit that supports our winning strategy.”
It is the second acquisition for Darden in as many years. It completed a deal for Ruth’s Chris Steak House last summer.
Darden will pay $37.50 per share to acquire Chuy’s, which represents a 10.3x of the chain’s transaction adjusted EBITDA over the past 12 months.
"We are excited about the opportunity to join the Darden family and its portfolio of well-respected brands,” said Chuy’s CEO Steve Hislop in a statement. “Darden shares many of our same core values, particularly our operating philosophy and strong team member cultures. Together we will accelerate our business goals and bring our authentic, made-from-scratch Tex-Mex to more guests and communities.”
Like much of the casual-dining segment, Chuy’s has struggled with declining sales and guest counts in recent months. Same-store sales fell 5.2% year over year in the first quarter.
Chuy's is the 110th largest restaurant chain in the U.S., according to Technomic. It reported systemwide sales of $461.3 million last year and will slot in as the seventh-largest brand in Darden's portfolio.
The others, in order of sales, are Olive Garden, LongHorn, Ruth's Chris, Yard House, Cheddar's Scratch Kitchen, The Capital Grille, Seasons 52, Bahama Breeze Island Grille and Eddie V's Prime Seafood.
After adding Chuy's, Darden will own 10 of the 50 largest full-service chains in the U.S.
CORRECTION: A previous version of this story said Chuy's was the 101st largest chain in the U.S. It is the 110th largest.
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