food, anyone?
"13-Jun-02
Trader's Edge: Darden (DRI) on the Prowl [BRIEFING.COM - Patrick J. O'Hare] While most companies are always exploring the possibility of growth through acquisition, few are as forthcoming with their plan of attack as Darden Restaurants (DRI 25.84) was at an investment conference on Wednesday. One reason for the typical lack of clarity is that an acquirer doesn't want to give the market an opportunity to bid up the stock price of a potential acquiree as that could, ultimately, raise the acquisition price. Be that as it may, Darden provided some insight on some of its acquisition parameters, not to mention ample room for speculation as to which companies might be possible takeover targets...
What Darden Said
According to Reuters, Darden, first, backed Wall Street earnings estimates with a forecast of 15-20% annual EPS growth. The company then went on to say that it was looking to add another restaurant chain to its operation. Specifically, it is looking for a restaurant chain that is compatible with its existing concepts, that has at least $500-700 mln in sales, and that would meet a target of reaching $1.0 bln in sales within ten years.
Who Is Darden Restaurants?
Darden Restaurants is the largest publicly-held casual dining restaurant company in the U.S. At the end of fiscal Q3 (Feb), it operated 1,193 Red Lobster, Olive Garden, Bahama Breeze, and Smokey Bones BBQ Sports Bar restaurants in North America. Red Lobster and Olive Garden, though, are its core concepts as they comprise 96% of Darden's total restaurant count. In FY01, Darden recorded sales of $4.02 bln and it is expected to report total sales of approximately $4.4 bln in FY02, which ended in May. Currently, it sports a market capitalization of $4.48 bln.
The Possible Targets
Keeping Darden's pre-requisites in mind, the following publicly-held restaurant companies hit the radar screen (in no particular order) as potential takeover candidates for Darden. As a reminder, the core Red Lobster and Olive Garden concepts are casual, full-service restaurants that provide quality food and service at affordable prices. Red Lobster specializes in-- surprise-- seafood, and Olive Garden specializes in Italian fare.
Applebee's (APPB 25.37): develops, franchises and operates casual dining restaurants under the name "Applebee's Neighborhood Grill & Bar." As of May 26, APPB operated 1,416 Applebee's restaurants system-wide in 49 states and eight international countries. Its restaurants feature a broad selection of entrees, including beef, chicken, seafood and pasta items prepared in a variety of cuisines, as well as appetizers, salads, sandwiches, specialty drinks and desserts... In FY01, APPB had sales of $744.3 mln. It has a market cap of $1.42 bln
Cheesecake Factory (CAKE 37.63): as of April 25, CAKE operated 52 upscale full service, casual dining restaurants under The Cheesecake Factory trademark in 18 states and Washington, DC. Its restaurants offer approximately 200 menu items at moderate prices including appetizers, pizza, seafood, steaks, chicken, burgers, pasta, specialty items, salads, sandwiches, omelets and desserts... In FY01, CAKE reported sales of $539.1 mln. It has a market cap of $1.90 bln.
Landry's Restaurants (LNY 25.61): owns and operates seafood restaurants primarily under the trade names Landry's Seafood House, Joe's Crab Shack, The Crab House and Charley's Crab. In addition, the Company owns and operates domestic and licenses international rainforest themed restaurants under the trade name Rainforest Cafe. As of March 31, LNY operated 213 full-service, casual dining restaurants. Its seafood restaurants feature a wide variety of broiled, grilled and fried seafood items while the Rainforest Café menu offers traditional American fare, including beef, chicken and seafood. In FY01, LNY reported sales of $746.6 mln. Its current market cap is $733.0 mln
Lone Star Steakhouse and Saloon (STAR 20.97): as of March 19, owned and operated 249 mid-priced, full-service, casual dining restaurants, including 20 upscale steak restaurants consisting of 5 Del Friscos restaurants and 15 Sullivan's Steakhouse restaurants. Internationally, STAR operates 25 Lone Star Steakhouse & Saloon restaurants in Australia and a licensee operates one restaurant in Guam. Its restaurants feature a limited menu that concentrates on high quality USDA choice-graded steaks.... In FY01, STAR reported sales of $598 mln. The company has a market cap of $519.1 mln
Ruby Tuesday's (RI 22.42): as of March 5, the Company owned and operated 391 Ruby Tuesday restaurants located in 25 states. Franchise operations included 182 domestic and 16 international Ruby Tuesday restaurants. Its restaurants are casual, full-service restaurants that have a comfortable, nostalgic look and feel. Some of the more popular entree items include fajitas, baby-back ribs, chicken entrees, pasta entrees, burgers, soups, sandwiches, salad bar, and signature Tallcake desserts in strawberry and chocolate varieties... In FY01, RI reported sales $789.6 mln. It has a market cap of $1.46 bln." |
