Darden (DRI) to Acquire Yard House in $585M Deal; to Cut Expected FY13 Buyback, Adjusts Outlook

Darden Restaurants, Inc. (NYSE: DRI) today announced that it has agreed to acquire Yard House USA, Inc. for $585 million in an all-cash transaction from private equity firm TSG Consumer Partners LLC, management and investors. The total transaction price of $585 million includes approximately $30 million of cash tax benefits that are expected to be realized by Darden in fiscal 2013 and fiscal 2014. The brand will become part of Darden's Specialty Restaurant Group, which includes The Capital Grille, Bahama Breeze, Seasons 52 and Eddie V's. Including acquisition-related costs of approximately seven to ten cents per share, offset partially by Yard House's earnings from operations, the transaction is expected to be dilutive to Darden's diluted net earnings per share in fiscal 2013 by approximately three to five cents and accretive thereafter. Darden expects to complete the transaction early in its fiscal second quarter.

Completion of the transaction is subject to certain conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and satisfaction of other customary closing conditions.

Goldman, Sachs & Co. is acting as exclusive financial advisor and Hunton & Williams LLP is acting as legal advisor to Darden. J.P. Morgan Securities LLC is acting as exclusive financial advisor and Sidley Austin LLP is acting as legal advisor to TSG Consumer Partners LLC and Yard House.

Darden revised its fiscal 2013 outlook to account for the impact of the transaction on sales and earnings. The Company still expects combined full-year U.S. same-restaurant sales growth in fiscal 2013 of approximately 1% to 2% for Red Lobster, Olive Garden and LongHorn Steakhouse, and continues to expect to open approximately 100 to 110 net new restaurants in fiscal 2013, exclusive of the Yard House transaction.

However, as a result of the transaction, the Company expects total sales growth of between 9% and 10% in fiscal 2013 and anticipates that diluted net earnings per share growth from continuing operations in fiscal 2013 will be in the range of 5% to 9%. As a result of the Yard House acquisition, the Company projects that share repurchase during fiscal 2013 will total approximately $50 million, which is down from the $200 million to $250 million of share repurchase previously projected.

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