Darden Restaurants, Inc. announced that it has agreed to acquire Cheddar's Scratch Kitchen (Cheddar's) for $780 million in an all-cash transaction from its stockholders including private equity firms L Catterton and Oak Investment Partners. Cheddar's will add to Darden's portfolio of differentiated brands which currently includes Olive Garden, LongHorn Steakhouse, Yard House, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V's.

Cheddar's was founded in 1979 in Arlington, Texas and features high-quality, made-from-scratch food at compelling prices in a polished yet warm atmosphere. Today, Cheddar's has 165 locations, including 140 owned and 25 franchised, across 28 states with significant growth opportunities in new and existing markets and average annual restaurant volumes of $4.4 million.

Transaction Highlights

Darden has agreed to acquire Cheddar's for $780 million, subject to customary adjustments.

Net of certain tax benefits estimated at approximately $30 million, the purchase price represents a 10.4x multiple of trailing twelve month adjusted EBITDA ending December 2016.

Darden expects between $20 and $25 million of annualized pre-tax run rate synergies by fiscal 2019.

Total acquisition and integration-related expenses are expected to be approximately $25 to $35 million.

The transaction is expected to be accretive to Darden's diluted net earnings per share in fiscal 2018 by approximately 12 cents, excluding any acquisition and integration-related expenses.

Darden will also pay $10 million for certain Cheddar's transaction-related tax attributes and reimburse its equityholders for pre-closing capital expenditures on new restaurants under development.

Ian Baines, CEO of Cheddar's, will remain President of Cheddar's and report to Gene Lee, Darden President and CEO.

The completion of the transaction is expected to occur in Darden's fiscal 2017 fourth quarter and is subject to customary closing conditions.