Darden Adds Chuy’s to Menu – Merger Arbitrage Mondays

Chuy’s Holdings Inc. (CHUY): $37.08

Market Cap: $643.38 M

Deal Size: $605 M

Back in 2014, a heated battle between Darden Restaurants (DRI) and the activist hedge fund Starboard Value brought to light some surprising inefficiencies within Darden’s flagship chain, Olive Garden. In an attempt to win control of Darden’s board, Starboard pointed out not only the wastefulness of unlimited breadsticks at Olive Garden but also its puzzling decision to stop salting its pasta water as “adding salt to the boiling water could jeopardize warranties on pots”. These small yet significant details became symbols of the broader issues within Darden, ultimately helping Starboard win the battle and replace the entire board at the Orlando-based restaurant operator.

Darden has come a long way since then, shedding underperforming brands like Red Lobster in 2014 and acquiring new ones. It currently owns several full-service restaurants in the U.S. and Canada, including LongHorn Steakhouse, Yard House, and Ruth’s Chris Steak House, along with Olive Garden.

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