Brinker International Inc. has acquired 103 franchised Chili’s Grill & Bar restaurants with the $106.5 million acquisition of Pepper Dining Holding Corp., the company said Thursday.
Charlotte, N.C.-based Pepper Dining operated Chili's restaurants in the Northeast and Southeast, Brinker said. The 103 units comprise about a quarter of Chili’s 435 domestic franchised restaurants as of the third quarter ended March 25.
The purchase was funded under Brinker's existing credit facility, the company said, and earnings should be accretive in the 2016 fiscal year.
"This acquisition represents a compelling opportunity to create value for our shareholders and generate additional earnings and cash flow growth," Brinker president and CEO and Chili's president Wyman Roberts said in a statement.
"We plan to leverage our strong Chili's operations infrastructure, roll out the brand's new loyalty program to all restaurants and complete reimaging of the portfolio,” Roberts said.
Brinker said the Chili’s franchise acquisition fit within its “capital allocation strategy of investing in the business, managing debt within investment-grade metrics and returning cash to shareholders.”
Capital needs of the acquired restaurants will be funded with cash flow, the company noted, and it did not expect the deal to impact its share repurchase capacity.
As of March 25, Brinker had 827 company-owned domestic Chili’s restaurants and 13 company-owned international Chili’s locations, and 740 domestic and international franchised Chili’s locations, totaling 1,580 units. Brinker also owns the 49-unit Maggiano’s Little Italy brand.
Brinker said it would provide details about the acquisition during its fourth quarter earnings call in August.
Brinker’s purchase of the franchised units comes as a number of restaurant operators are selling corporate units to franchisees, including Famous Dave’s, Jamba Juice, McDonald’s and TGI Fridays. In February, Wendy’s said it would sell 500 company-owned restaurants to franchisees.
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