Darden Restaurants, operator of the Olive Garden and Red Lobster chains, has agreed to acquire rival Yard House USA $585m (£380m) in an all-cash transaction from private equity firm TSG Consumer Partners LLC.
Yard House, which offers contemporary American cuisine and operates 39 restaurants across 13 states, will become part of Darden's Specialty Restaurant Group that includes the Capital Grille and Seasons 52 brands.
Including acquisition-related costs of approximately 7 to ten cents per share, offset partially by Yard House's earnings from operations, the transaction is expected to be dilutive to Darden's diluted net earnings per share in fiscal 2013 by approximately 3 to 5 cents and accretive thereafter.
Darden said it expects to complete the transaction early in its fiscal second quarter.
Harald Herrmann, president and chief executive of Yard House USA, said: “This transaction offers a tremendous opportunity to begin the next chapter in Yard House's high growth evolution to become a national brand. We’re excited about the opportunity, and that we and our team members will become a part of one of the world’s largest and most successful restaurant companies.”
Clarence Otis, chairman and chief executive of Darden, said: “With this addition, Darden's Specialty Restaurant Group will have nearly $1bn in annual sales and be even better positioned to sustain annual sales growth of 15% to 20% for years to come. Now the Group will even more clearly stand with Olive Garden, Red Lobster and LongHorn Steakhouse as a major driver of our growth and value creation. The Specialty Restaurant Group is also significant because, in appealing to higher percentages of both younger and higher income guests, its brands round out Darden's overall guest base in very important ways.”
