Darden Buys Cheddar's
Restaurants has agreed to acquire Cheddar's Scratch Kitchen (Cheddar's)
for $780 million in an all-cash transaction from its stockholders
including private equity firms L Catterton and Oak Investment Partners.
Cheddar's will add to Darden's portfolio of differentiated brands which
currently includes Olive Garden, LongHorn Steakhouse, Yard House, The
Capital Grille, Seasons 52, Bahama Breeze and Eddie V's.
Cheddar's was founded in 1979 in Arlington, Texas and features
high-quality, made-from-scratch food at compelling prices in a polished
yet warm atmosphere. Today, Cheddar's has 165 locations, including 140
owned and 25 franchised, across 28 states with significant growth
opportunities in new and existing markets and average annual restaurant
volumes of $4.4 million.
- Darden has agreed to acquire
Cheddar's for $780 million, subject to customary
- Net of certain tax benefits
estimated at approximately $30 million, the purchase
price represents a 10.4x multiple of trailing twelve month adjusted
EBITDA ending December 2016.
- Darden expects between $20
and $25 million of annualized pre-tax run rate synergies by
- Total acquisition and
integration-related expenses are expected to be approximately $25
to $35 million.
- The transaction is expected to be
accretive to Darden's diluted net earnings per share in fiscal 2018 by
approximately 12 cents, excluding any acquisition and
- Darden will also pay $10
million for certain Cheddar's transaction-related tax attributes
and reimburse its equityholders for pre-closing capital expenditures on
new restaurants under development.
- Ian Baines, CEO
of Cheddar's, will remain President of Cheddar's and report to
Gene Lee, Darden President and CEO.
- The completion of the transaction
is expected to occur in Darden's fiscal 2017 fourth quarter and is
subject to customary closing conditions.
is an undisputed casual dining value leader with broad appeal and strong
average restaurant volumes," said Darden CEO Gene Lee. "Cheddar's is a
great fit in the Darden portfolio because it complements our existing
brands. This addition will also enable Darden to further strengthen two
of our most important competitive advantages: our significant scale and
our extensive data and insights."
Ian Baines, Cheddar's CEO, stated, "We are excited about the opportunity
to be a part of Darden. Our operating philosophy and values are similar
and we believe this transaction provides a great opportunity for our
team members to continue to grow and develop in their careers.
Additionally, Darden's expertise will enable us to further capitalize on
our growth potential."
BofA Merrill Lynch is acting as exclusive financial advisor and Hunton &
Williams LLP is acting as legal advisor to Darden. Morgan Stanley & Co.
LLC is acting as exclusive financial advisor to Cheddar's and DLA Piper
is acting as legal advisor to L Catterton, Oak Investment Partners and