Darden Restaurants, the parent company of Olive Garden, LongHorn Steakhouse, and The Capital Grille, is set to acquire Ruth’s Hospitality Group, the parent firm of Ruth’s Chris Steak House for $715m in an all-cash transaction. The sale is expected to close in June, pending regulatory clearance.
Ruth’s Chris Steak House, with 154 locations worldwide, has struggled during the Covid-19 pandemic. However, shares rebounded within a year of the initial outbreak, climbing about 58%. The acquisition follows Darden’s announcement in January that it was looking to add a tenth chain to its portfolio for the right price.
The upscale steakhouse chain has 80 company-owned or operated locations and 74 franchised restaurants worldwide. The purchase adds to Darden’s existing steak chains, making it more competitive, at a time of growing demand for meat.
Cheryl Henry is expected to stay on as the president of Ruth’s Chris following the acquisition. The all-cash acquisition is expected to provide Ruth’s Chris team members with more opportunities to grow and continue the growth of the brand.
Restaurants are facing rising food costs, with 92% of operators saying inflated food prices pose a significant issue to their business, according to the National Restaurant Association’s state of the industry report. However, Darden expects the deal to bring in $5m to $10m in pretax synergies in the first year and an additional $15m to $20m in the second year.
The acquisition marks the company’s first acquisition since adding Cheddar’s Scratch Kitchen to its portfolio in 2017. Darden seeks to expand its portfolio, following its best year for same-store sales growth in over twenty years. The company plans to double its investment in digital marketing in the coming year.
In conclusion, the acquisition of Ruth’s Hospitality Group is a significant move for Darden Restaurants, expanding its portfolio and existing steak chains in a growing market, albeit at a time of rising food prices. The acquisition is expected to bring in considerable synergies and may provide opportunities for Ruth’s Chris team members. The deal is expected to close in June, pending regulatory clearance.
