ORLANDO Fla. Darden Restaurants Inc. on Aug. 31 commenced its tender offer to acquire all outstanding shares of common stock of Rare Hospitality International Inc. for $38.15 per share. The two restaurant companies announced Aug. 16 that they had agreed to a merger in which Darden is purchasing the steakhouse operator for about $1.4 billion, including debt, making it one of the largest strategic purchases in the industry.
The purchase is being made for Darden through its wholly owned subsidiary Surf & Turf Merger Corp. The $38.15 per-share price is a 39-percent premium over Rare's average closing stock price for the 30 days prior to the announcement.
The tender offer expires at midnight EDT on Sept. 28.
The transaction received unanimous approval by the boards of directors at both companies. Darden, which is based in Orlando, will finance the acquisition through cash and newly committed credit facilities of $1.2 billion and a $700 million senior revolving credit. The deal is expected to close in October.
Atlanta-based Rare operates or franchises 317 restaurants, including 287 LongHorn Steakhouse restaurants and 28 Capital Grille restaurants. All but a few LongHorn units outside of the country are operated by the company. Rare recently shed its Bugaboo Creek Steakhouse brand. It posts total annual sales of around $1 billion.
Darden operates 1,397 casual-dining restaurants, including 680 Red Lobster units, 614 Olive Garden outlets, 23 Bahama Breeze restaurants and seven Seasons 52 units. The company, which boasts systemwide sales of more than $5.6 billion, also owns the 73-unit Smokey Bones barbecue chain, which it put up for sale earlier this year after closing more than 50 units.
At the time of the announcement, Clarence Otis, chairman and chief executive of Darden, said: "The combined organization is strongly positioned to capture the long-term growth opportunity in full-service restaurants. Rare Hospitality's two outstanding brands and the talented leadership and restaurant teams behind them enhance Darden's entire organization, but particularly our unit-growth prospects. ... And, we see significant synergies from increased efficiency and effectiveness in purchasing, distribution and other restaurant and corporate support. With all these benefits, we believe the combination of Darden and Rare leaves us better positioned to continue to deliver into the future the top quartile value for shareholders that's been a hallmark of each company."
Philip J. Hickey Jr., chairman and chief executive of Rare, will stay on for 12 months as an exclusive adviser to Otis and the Darden executive team, while other senior executives from Rare will remain with the combined company.
Gene Lee, Rare's president and chief operating officer, will become president of Darden's new Specialty Restaurant Group, which will include The Capital Grille, Bahama Breeze and Seasons 52. David George will remain president of LongHorn Steakhouse, and John Martin will remain president of The Capital Grille. W. Douglas Benn, Rare's chief financial officer, will continue with the combined company as a senior leader of the team with day-to-day responsibility for integration.