Olive Garden Parent Company To Acquire Ruth's Chris Steak House
One of the largest restaurant groups in the U.S., Darden Restaurants, Inc., is poised to buy Ruth's Hospitality Group, known for the eponymous Ruth's Chris Steak House, for $715 million. The move further consolidates the restaurant industry and grows the portfolio of Darden, which already owns Olive Garden, Longhorn Steakhouse, and The Capital Grille, among other brands.
Ruth's represents the third fine-dining restaurant chain to become part of Darden, along with The Capital Grille and Eddie V's, and has 150 locations across the U.S. The company's current fine-dining segment has proven to be resilient in the post-pandemic economy despite fears of a recession on the horizon and rising supply chain and labor costs.
In a press release, Darden says that it expects the sale, unanimously approved by both companies' boards, to be finalized in June. The $715 million figure values Ruth's stock at $21.50 per share, which marks a premium of 34% over the May 2, 2023 closing price. While the total acquisition costs and expenses are estimated to be between $55 to $60 million, Darden forecasts pre-tax synergies around $5 to $10 million in year one that will rise to between $15 to $20 million the following year.
Ruth's Chris Steak House is a complementary addition to Darden's portfolio
The sale marks an unexpected and major move in the food-service sector. Myriad factors, from rising interest rates to spiking costs, have seen acquisitions put on the backburner as companies revitalize their existing brands. The two companies involved, though, have long histories of changing ownership and market movement.
Ruth's Chris Steak House has its roots in New Orleans, originally opened as the Chris Steak House by businessman Chris Matulich. Ruth Fertel purchased the restaurant in 1965, but a contractual caveat kept her from expanding under the original name. She opened franchised locations as Ruth's Chris Steak House. Fertel sold the controlling interest to Madison Dearborn Partners, a Chicago private equity firm, in 1999, and the company went public in 2005.
Bill Darden founded Red Lobster restaurant in Lakeland, Florida in 1968 and sold the concept to General Mills two years later. He remained as a vice president of General Mills, overseeing the growth of the Red Lobster chain. General Mills diversified its restaurant portfolio with the launch of Olive Garden. In an effort to refocus on consumer products, it spun off its restaurant holdings as a public company in 1995.
In the company press release, Darden CEO Rick Cardenas states, "Ruth's Chris is a strong and distinctive brand in the fine dining segment with an impressive history ... It fits the criteria we have for adding a brand to our portfolio and supports our winning strategy. Ruth's Chris is a great complement to our portfolio of brands."