Chuy’s Holdings, Inc. (NASDAQ: CHUY) experienced a remarkable afterhours surge on Wednesday, despite showing minimal movement during regular trading hours. The stock soared by 48% following news that Darden Restaurants, Inc. (owner of the Olive Garden chain), had agreed to acquire the Tex-Mex restaurant operator.
Chuy’s Acquisition Details and Market Reaction
Founded in Austin, Texas in 1982, Chuy’s operates 101 full-service restaurants across 15 states, offering authentic Tex-Mex dishes in a unique and lively atmosphere. Darden’s acquisition of Chuy’s is an all-cash deal valued at $605 million, which translates to $37.50 per share—a 48.4% premium over Chuy’s Wednesday closing price. The deal has been unanimously approved by the boards of both companies and is expected to close in Darden’s fiscal second quarter.
Darden, which boasts a portfolio including LongHorn Steakhouse and Ruth’s Chris Steak House, will integrate Chuy’s restaurants into its extensive brand lineup. While Chuy’s stock surged over 47% to $37.24 in extended trading, Darden’s shares saw a slight dip of about 1%. The transaction is anticipated to be neutral to Darden’s net earnings per share for fiscal 2025, excluding acquisition-related expenses, and accretive by up to 15 cents per share by fiscal 2027.
Financial Advisors and Market Speculation
BofA Securities served as Darden’s financial advisor, while Piper Sandler advised Chuy’s. The acquisition includes expected pre-tax synergies of approximately $15 million by the end of fiscal 2026.
Total acquisition and integration-related expenses are estimated between $50 million and $55 million. Despite sufficient liquidity for the deal, some market participants expressed skepticism on social media. Critics argue that trading halts during buyout announcements prevent investors from capitalizing on the news.
Adding to the intrigue, there was an unusual options trade in late June where an investor purchased $30,000 worth of Chuy’s call options at a $27.50 strike price, expiring in August. This purchase, seemingly an insider move, resulted in substantial gains as the acquisition news broke.
Conclusion
Chuy’s Holdings’ afterhours rally underscores the significant impact of acquisition news on stock prices. As Darden prepares to integrate Chuy’s into its portfolio, investors will closely watch the merger’s progress and its financial implications.
The transaction marks a notable expansion for Darden, promising to enhance its market presence with the addition of Chuy’s vibrant and eclectic restaurant experience.
