Chuy's Holdings, Inc. (NASDAQ:CHUY), a Texas-based restaurant company, announced today that its shareholders have approved a merger agreement, making it an indirect, wholly-owned subsidiary of Darden Restaurants (NYSE:DRI), Inc. The special meeting of stockholders, held today, saw the approval of the merger with Darden, a company known for its portfolio of dining brands.
The agreement, initially dated July 17, 2024, received overwhelming support from Chuy's shareholders, with 15,055,082 votes in favor, 5,279 votes against, and 25,500 abstentions. The merger proposal was one of three agenda items during the special meeting, all of which passed with majority votes.
In addition to the merger, shareholders also approved, on a non-binding advisory basis, the compensation that may be paid to Chuy's named executive officers in connection with the merger. The advisory compensation proposal received 14,674,462 votes for, 395,909 against, and 15,490 abstentions.
The third proposal on the agenda, which would allow for adjournment of the meeting to solicit additional proxies if necessary, was also approved with 13,962,112 votes for, 1,096,853 against, and 26,896 abstentions. However, the adjournment was deemed unnecessary as the merger agreement had already been adopted.
At the time of the special meeting, there were 17,232,538 shares of Chuy's common stock outstanding and entitled to vote. The definitive proxy statement filed with the SEC on September 5, 2024, and supplemented on September 30, 2024, provided detailed descriptions of the proposals.
The completion of the merger will see Chuy's Holdings joining the ranks of Darden's other brands, expanding Darden's presence in the retail eating space. Darden is well-known for its ownership of various restaurant chains, and the acquisition of Chuy's is expected to enhance its portfolio.
In other recent news, Chuy's Holdings is set to be acquired by Darden Restaurants in a $605 million deal, a significant development that will add Chuy's 101 restaurants across 15 states to Darden's portfolio. The agreement has been approved by the boards of both companies and is expected to be finalized in Darden's fiscal second quarter. Baird responded to this by raising the price target for Chuy's shares to $38.00, maintaining a neutral rating on the stock.
However, Chuy's Holdings has seen a downgrade from Jefferies due to concerns about its projected sales and traffic performance. Stifel and Piper Sandler also reduced their price targets for Chuy's following a mixed quarter. Despite these changes, Chuy's reported an earnings per share of $0.42, surpassing both Stifel's and the consensus estimate of $0.36.
On the financial front, Chuy's recently reported Q1 2024 earnings, noting a slight decrease in revenue to $110.5 million. Despite this, the company's off-premise business grew to represent about 29% of total revenue. Looking ahead, Chuy's plans to open 6-8 new restaurants in 2024 and expects to see improved trends in the second half of the year as new off-premise initiatives take hold and new menu items attract customers.
InvestingPro Insights
As Chuy's Holdings, Inc. (NASDAQ:CHUY) prepares to merge with Darden Restaurants, Inc., InvestingPro data provides additional context to this significant corporate development. The company's market capitalization stands at $645.88 million, reflecting its position in the restaurant industry. Chuy's has demonstrated profitability over the last twelve months, with a P/E ratio of 24.34, suggesting investors are willing to pay a premium for its earnings.
InvestingPro Tips highlight that management has been aggressively buying back shares, which may have contributed to shareholder confidence in the merger decision. Additionally, the company operates with a moderate level of debt and its liquid assets exceed short-term obligations, potentially making it an attractive acquisition target for Darden.
The strong return of 59.31% over the last three months, as reported by InvestingPro, aligns with the positive sentiment surrounding the merger announcement. However, it's worth noting that 3 analysts have revised their earnings downwards for the upcoming period, which could reflect uncertainties related to the transition.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for Chuy's Holdings, providing a deeper understanding of the company's financial health and market position as it enters this new chapter with Darden Restaurants.
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