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A pedestrian wearing a protective mask walks past Ruth’s Chris restaurant in Washington, D.C., on Monday, April 20, 2020.
Andrew Harrier | Bloomberg via Getty Images
Darden Restaurants Wed said she buys Roth Hospitality Groupthe parent company of Ruth’s Chris Steak House for $715 million.
The deal values Ruth at $21.50 per share in an all-cash transaction. The steakhouse has more than 150 locations worldwide and generated $505.9 million in revenue in 2022.
Roth shares were up nearly 34% in pre-market trading, after closing Tuesday at about $16 per share. Darden stock was flat.
Ruth’s will join Darden’s fine dining portfolio, which already includes The Capital Grille and Eddie V’s. In Dardenne’s most recent quarter, its fine dining restaurants reported same-store sales growth of 11.7%. The segment’s average weekly sales have more than doubled from pre-pandemic levels.
The steakhouse is Darden’s first acquisition in six years. Cheddar’s purchased Scratch Kitchen in 2017 for $780 million. CEO Rick Cardenas noted in january that the company was looking to add the Series 10 to its portfolio at the right price.
Darden plans to hold a conference call Thursday at 8:30 a.m. ET to discuss the deal.
The agreement breaks the drought for restaurant deals. Higher interest rates made acquisitions more expensive.
Moreover, many restaurant giants like Yum Brands and Restaurant Brands International have instead focused on flipping wallet laggards and expanding their new chains. A turbulent stock market, inflation and fears about a recession have also kept some restaurant chains from going public.
But a big deal is expected to be on the horizon: Subway’s upcoming sale. The sandwich chain is reportedly seeking at least $10 billion to end more than five decades of family ownership.
Darden’s acquisition of Ruth’s precedes the steakhouse’s first-quarter earnings report, which is expected to be released before the bell on Friday. On Wednesday, the company said it was canceling the conference call scheduled for that morning.
Last quarter, Roth reported same-store sales growth of 4.5%.
Darden expects acquisition and integration expenses to cost the company between $55 million and $60 million. But it also expects $5 million to $10 million in pre-tax synergies in the first year and an additional $15 million to $20 million in the second year.
The transaction is expected to close in June if usual closing conditions are met. Sheryl Henry, CEO of Roth, will remain as President of Chris Roth and will report to Cardenas.
Ruth’s Chris was founded in 1965 after purchasing Ruth Fertel Chris Steak House in New Orleans. The terms of the sale prevented her from reusing the name at other locations, so she chose to name the new locations Ruth’s Chris Steak House. The company went public in 2005.
As of Tuesday’s close, Darden’s stock is up nearly 10% this year, giving it a market value of $18.4 billion. Roth shares are up 3% this year as of Tuesday, bringing their market value to $525 million.
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