Olive Garden owner Darden to buy Yard House for $585 million
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Darden Restaurants Inc., the owner of Olive Garden and Red Lobster, will buy Irvine-based restaurant chain Yard House USA Inc. for $585 million in cash.
The deal with Yard House owner TSG Consumer Partners will place the chain -- known for its vast selection of draft beers -- in Darden’s Specialty Restaurant Group, which includes the Capital Grille, Bahama Breeze, Seasons 52 and Eddie Vs.
The more upscale restaurants help appeal to younger and higher-income guests than Darden’s more widespread brands. Yard House, with more than 130 taps on average, takes advantage of the recent popularity of craft beers.
In the second quarter of 2012, year-over-year revenue at Yard House has boomed 27%.
The chain was first launched in 1996 and now has 39 restaurants across 13 states, featuring a soundtrack of rock music and an energetic atmosphere. Its addition to Darden’s specialty restaurants is expected to boost the group’s annual sales to $1 billion.
In a conference call Thursday, Darden executives said they expect the Yard House chain to eventually expand to 200 units.
If the deal passes muster with anti-trust regulators, it is expected to close sometime in the fall, during Darden’s fiscal second quarter. The purchase price includes $30 million of expected cash tax benefits.
Yard House’s existing leadership will continue to lead its day-to-day operations under Darden. Chief Executive Harald Herrmann will become president of Yard House and report to Gene Lee, president of Darden’s specialty restaurants.
For several quarters, Darden has had to rely on its specialty group to boost its sales, which have been regularly dragged down by Olive Garden and Red Lobster. Olive Garden’s same-store sales tumbled 1.8% in the quarter ended May 27 compared with a year earlier, while Red Lobster’s same-store sales slid 3.9%.
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