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Darden Inks Agreement to Acquire Cheddar's Scratch Kitchen
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Darden Restaurants, Inc. (DRI - Free Report) has entered into an agreement to buy small restaurant chain, Cheddar's Scratch Kitchen (Cheddar's), in an all-cash deal worth $780 million from its stockholders including private-equity firms L Catterton and Oak Investment Partners.
The transaction is expected to close in Darden's fourth-quarter fiscal 2017 and is subject to customary closing conditions.
Cheddar's has 165 locations (including 140 owned and 25 franchised) across 28 states and was founded in Arlington, TX, in the year 1979. This restaurent company offers premium, made-from-scratch food at riveting prices in a refined yet warm ambiance.
In fact, the restaurant chain is best known for its house-smoked baby-back ribs, chicken fingers, and Monte Cristo sandwich. Further, it reports average annual restaurant volumes of $4.4 million and has noteworthy growth opportunities in new and existing markets.
Deal Details
Excluding certain expenses, Darden anticipates the transaction to be accretive to its adjusted per share in fiscal 2018 by roughly 12 cents per share.
The company also expects between $20--$25 million of annualized pre-tax run rate synergies by fiscal 2019.
Meanwhile, total acquisition and integration-related expenses are likely to be in the range of $25--$35 million.
Rationale Behind
Cheddar's acquisition will add a casual dining chain to Darden's portfolio of differentiated brands which currently comprises Olive Garden, LongHorn Steakhouse, Yard House, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V's.
Darden believes that this addition will allow it to further fortify two of its most vital competitive advantages -- considerable scale as well as wide-ranging data and insights -- going ahead.
Bottom Line
Darden’s shares have increased 27.9% over the past six months as against the Zacks categorized Retail–Restaurants industry’s fall of 2.9%.
Furthermore, shares of Darden rose nearly 4% in afterhours trading on Mar 27, after the company reported better-than-expected third-quarter fiscal 2017 results. Notably, this quarter marked the tenth consecutive earnings beat for the company. Also, the company raised its full-year fiscal 2017 adjusted earnings per share projection.
We note that Darden is one of the leading casual dining restaurant companies worldwide with over 1,500 restaurants that generate $7 billion in annual sales.
However, over the past few quarters, the U.S. restaurant space has not been too enticing for investors. Consumer behavior has been volatile and their willingness to spend on eating out diminished due to higher costs. Evidently, same-store sales growth had been dull in a difficult sales environment. In fact, a soft industry backdrop has been keeping Darden’s comps under check as well.
Nevertheless, with Cheddar's purchase, Darden acquires an undisputed casual dining value leader with extensive appeal and solid average restaurant volumes, given a traditional American menu. Thus, Cheddar's seems to be a great fit in the company’s portfolio as it not only complements its existing brands, but is also expected to aid in attracting customers. This in turn should drive Darden’s comps and resultantly sales.
The Zacks Consensus Estimate for Papa John’s 2017 earnings climbed 1.4%, over the past 60 days. The company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 10.26%.
Restaurant Brands’ earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 19.20%. Meanwhile, for 2017, earnings per share are expected to improve 14.9%.
The Zacks Consensus Estimate for Bob Evans Farms’ fiscal 2017 earnings climbed 1.3%, over the last 60 days. The company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 12.74%.
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Darden Inks Agreement to Acquire Cheddar's Scratch Kitchen
Darden Restaurants, Inc. (DRI - Free Report) has entered into an agreement to buy small restaurant chain, Cheddar's Scratch Kitchen (Cheddar's), in an all-cash deal worth $780 million from its stockholders including private-equity firms L Catterton and Oak Investment Partners.
The transaction is expected to close in Darden's fourth-quarter fiscal 2017 and is subject to customary closing conditions.
Cheddar's has 165 locations (including 140 owned and 25 franchised) across 28 states and was founded in Arlington, TX, in the year 1979. This restaurent company offers premium, made-from-scratch food at riveting prices in a refined yet warm ambiance.
In fact, the restaurant chain is best known for its house-smoked baby-back ribs, chicken fingers, and Monte Cristo sandwich. Further, it reports average annual restaurant volumes of $4.4 million and has noteworthy growth opportunities in new and existing markets.
Deal Details
Excluding certain expenses, Darden anticipates the transaction to be accretive to its adjusted per share in fiscal 2018 by roughly 12 cents per share.
The company also expects between $20--$25 million of annualized pre-tax run rate synergies by fiscal 2019.
Meanwhile, total acquisition and integration-related expenses are likely to be in the range of $25--$35 million.
Rationale Behind
Cheddar's acquisition will add a casual dining chain to Darden's portfolio of differentiated brands which currently comprises Olive Garden, LongHorn Steakhouse, Yard House, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V's.
Darden believes that this addition will allow it to further fortify two of its most vital competitive advantages -- considerable scale as well as wide-ranging data and insights -- going ahead.
Bottom Line
Darden’s shares have increased 27.9% over the past six months as against the Zacks categorized Retail–Restaurants industry’s fall of 2.9%.
Furthermore, shares of Darden rose nearly 4% in afterhours trading on Mar 27, after the company reported better-than-expected third-quarter fiscal 2017 results. Notably, this quarter marked the tenth consecutive earnings beat for the company. Also, the company raised its full-year fiscal 2017 adjusted earnings per share projection.
We note that Darden is one of the leading casual dining restaurant companies worldwide with over 1,500 restaurants that generate $7 billion in annual sales.
However, over the past few quarters, the U.S. restaurant space has not been too enticing for investors. Consumer behavior has been volatile and their willingness to spend on eating out diminished due to higher costs. Evidently, same-store sales growth had been dull in a difficult sales environment. In fact, a soft industry backdrop has been keeping Darden’s comps under check as well.
Nevertheless, with Cheddar's purchase, Darden acquires an undisputed casual dining value leader with extensive appeal and solid average restaurant volumes, given a traditional American menu. Thus, Cheddar's seems to be a great fit in the company’s portfolio as it not only complements its existing brands, but is also expected to aid in attracting customers. This in turn should drive Darden’s comps and resultantly sales.
Zacks Rank & Stocks to Consider
Darden currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in this sector include Papa John's International Inc. (PZZA - Free Report) , Restaurant Brands International Inc. (QSR - Free Report) and Bob Evans Farms, Inc. . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Papa John’s 2017 earnings climbed 1.4%, over the past 60 days. The company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 10.26%.
Restaurant Brands’ earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 19.20%. Meanwhile, for 2017, earnings per share are expected to improve 14.9%.
The Zacks Consensus Estimate for Bob Evans Farms’ fiscal 2017 earnings climbed 1.3%, over the last 60 days. The company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 12.74%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>