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ONE Group (STKS) Expands Portfolio With Safflower Holdings Buyout
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The ONE Group Hospitality, Inc. (STKS - Free Report) unveiled its plans to acquire Safflower Holdings Corp., the parent company of Benihana Inc. This deal, valued at $365 million, will be financed with $160 million in preferred equity and a portion of a new $390-million term loan and credit facility.
This strategic move aims to create a scaled platform, further diversifying and strengthening STKS's industry-leading portfolio of world-class, experiential restaurant concepts.
Founded in 1964, Benihana is a leading operator of highly differentiated experiential brands and currently operates 88 company-owned restaurants. It franchises or licenses an additional 17 venues in the Americas. The transaction will expand ONE Group's global presence to 168 venues, consisting of full-service entertainment and grill restaurants across its four distinctive experiential and complementary brands.
The acquisition is expected to add nearly $575 million in annualized system-wide revenues. It is projected to contribute approximately $70 million in annual run-rate EBITDA before synergies. These synergies are estimated at $20 million annually.
The company expects that it will take 24 months to realize synergies post-closing. This is expected to bring the company’s pro-forma annualized run rate EBITDA with synergies to more than $135 million. The transaction is expected to be immediately accretive to earnings per diluted share. The Deal is expected to close by the end of the second quarter of 2024.
Focus on Expansion
The company is benefiting from new restaurant openings and long-term growth strategies. ONE Group focuses on expansion efforts to drive growth. In 2023, STKS saw strong unit development, with the addition of four new restaurants in the fourth quarter.
These restaurants are off to strong starts, reinforcing STKS's confidence in the long-term EBITDA and earnings potential of its development pipeline, showcasing industry-leading ROIs for shareholders.
In 2024, STKS plans to open six to eight additional STKs, including one or two managed and licensed locations. This highlights the enhanced flexibility in its pipeline for strategic restaurant openings. STKS anticipates a long-term addressable market of 200 global STK restaurants and 200 domestic Kona Grills.
Price Performance
Shares of ONE Group have declined 26.4% in the past six months against the industry’s 12.7% rise. Wage inflation, increased marketing expenses and general operating expense inflation mainly caused the downside.
Image Source: Zacks Investment Research
For 2024, total owned operating expenses as a percentage of owned restaurant net revenue are expected to hover around 83.0%. Earnings estimates for fiscal 2024 have declined in the past 30 days, depicting analysts’ concern regarding the stock’s growth potential.
Zacks Rank & Other Key Picks
ONE Group currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the Retail-Wholesale sector have been discussed below.
Brinker International, Inc. (EAT - Free Report) sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 212.7% on average. Shares of EAT have surged 32.3% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates 4.9% and 30.7% growth, respectively, from the year-ago period’s levels.
Texas Roadhouse, Inc. (TXRH - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter negative earnings surprise of 3.9%, on average. The stock has gained 43.3% in the past year.
The Zacks Consensus Estimate for TXRH’s 2024 sales and EPS suggests rises of 14% and 25.1%, respectively, from the year-ago period’s levels.
Shake Shack Inc. (SHAK - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 92.6%, on average. SHAK’s shares have surged 92.8% in the past year.
The Zacks Consensus Estimate for SHAK’s 2024 sales and EPS indicates 14.6% and 91.9% growth, respectively, from the year-ago period’s levels.
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ONE Group (STKS) Expands Portfolio With Safflower Holdings Buyout
The ONE Group Hospitality, Inc. (STKS - Free Report) unveiled its plans to acquire Safflower Holdings Corp., the parent company of Benihana Inc. This deal, valued at $365 million, will be financed with $160 million in preferred equity and a portion of a new $390-million term loan and credit facility.
This strategic move aims to create a scaled platform, further diversifying and strengthening STKS's industry-leading portfolio of world-class, experiential restaurant concepts.
Founded in 1964, Benihana is a leading operator of highly differentiated experiential brands and currently operates 88 company-owned restaurants. It franchises or licenses an additional 17 venues in the Americas. The transaction will expand ONE Group's global presence to 168 venues, consisting of full-service entertainment and grill restaurants across its four distinctive experiential and complementary brands.
The acquisition is expected to add nearly $575 million in annualized system-wide revenues. It is projected to contribute approximately $70 million in annual run-rate EBITDA before synergies. These synergies are estimated at $20 million annually.
The company expects that it will take 24 months to realize synergies post-closing. This is expected to bring the company’s pro-forma annualized run rate EBITDA with synergies to more than $135 million. The transaction is expected to be immediately accretive to earnings per diluted share. The Deal is expected to close by the end of the second quarter of 2024.
Focus on Expansion
The company is benefiting from new restaurant openings and long-term growth strategies. ONE Group focuses on expansion efforts to drive growth. In 2023, STKS saw strong unit development, with the addition of four new restaurants in the fourth quarter.
These restaurants are off to strong starts, reinforcing STKS's confidence in the long-term EBITDA and earnings potential of its development pipeline, showcasing industry-leading ROIs for shareholders.
In 2024, STKS plans to open six to eight additional STKs, including one or two managed and licensed locations. This highlights the enhanced flexibility in its pipeline for strategic restaurant openings. STKS anticipates a long-term addressable market of 200 global STK restaurants and 200 domestic Kona Grills.
Price Performance
Shares of ONE Group have declined 26.4% in the past six months against the industry’s 12.7% rise. Wage inflation, increased marketing expenses and general operating expense inflation mainly caused the downside.
Image Source: Zacks Investment Research
For 2024, total owned operating expenses as a percentage of owned restaurant net revenue are expected to hover around 83.0%. Earnings estimates for fiscal 2024 have declined in the past 30 days, depicting analysts’ concern regarding the stock’s growth potential.
Zacks Rank & Other Key Picks
ONE Group currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the Retail-Wholesale sector have been discussed below.
Brinker International, Inc. (EAT - Free Report) sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 212.7% on average. Shares of EAT have surged 32.3% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates 4.9% and 30.7% growth, respectively, from the year-ago period’s levels.
Texas Roadhouse, Inc. (TXRH - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter negative earnings surprise of 3.9%, on average. The stock has gained 43.3% in the past year.
The Zacks Consensus Estimate for TXRH’s 2024 sales and EPS suggests rises of 14% and 25.1%, respectively, from the year-ago period’s levels.
Shake Shack Inc. (SHAK - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 92.6%, on average. SHAK’s shares have surged 92.8% in the past year.
The Zacks Consensus Estimate for SHAK’s 2024 sales and EPS indicates 14.6% and 91.9% growth, respectively, from the year-ago period’s levels.