Darden Restaurants (NYSE: DRI), which owns Olive Garden and Red Lobster, has agreed to acquire Yard House USA Inc., another restaurant chain, for $585 million in an all-cash deal, the company announced on Thursday.
Orlando, Fla.-based Darden is hoping that Yard House's beer-centric restaurants can boost long-term sales. Both Olive Garden and Red Lobster have seen their same-store sales, which are sales from units that have been operating for at least one year, tumble in the most recent quarter.
Yard House specializes in a young, hip restaurant atmosphere that features more than 130 different beers on tap in its 39 restaurants. Darden will place Yard House in its Specialty Restaurant Group, which also includes Capital Grille and Bahama Breeze, and hopes to eventually expand Yard House into 200 restaurant locations.
With this addition, Darden's Specialty Restaurant Group will have nearly $1 billion in annual sales and be even better positioned to sustain annual sales growth of 15% to 20% for years to come, said Clarence Otis, Darden's chief executive officer. 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.
The company expects the acquisition to trim earnings by 3 to 5 cents in the next fiscal year, but boost profits later.
Shares fell nine cents to $50.11 in midday trading.