Submitted by Fox First at Ten on July 12th
ORLANDO, Fla. (AP) - Darden Restaurants Inc., operator of Red Lobster and Olive Garden, said Thursday that it is buying the Yard House USA restaurant chain to help broaden its appeal with younger and higher-income guests for $585 million in cash.
But it said profits would initially drop because of the deal and it would trim its share buyback plan to help pay for it, causing shares to fall $1.22, or 2.4 percent, in after-hours trading to $48.98.
The acquisition of Yard House from private equity firm TSG Consumer Partners and other investors is expected to close by November.
Darden said it expects the acquisition will initially hurt earnings by 3 to 5 cents per share in the fiscal year 2013 through next May but help boost profits after that.
Yard House, based in Irvine, Calif., offers an array of draft beers and food like pizzas, steaks and salads. It has 39 restaurants in 13 states.
Darden said that total revenue will rise in fiscal 2013 by 9 to 10 percent, helped by the transaction. Sales at Red Lobster, Olive Garden and LongHorn Steakhouse restaurants open a year or more are expected to rise 1 to 2 percent over the same period.
The company said that it would likely buy back only $50 million worth of shares through next May, below a previously expected $200 million to $250 million.
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Comments