The ONE Group Hospitality, Inc. STKS has set its sights on acquiring Safflower Holdings Corp., the parent company of Benihana Inc., in a deal worth $365 million. The financing for this acquisition will consist of $160 million in preferred equity and a portion of a new $390-million term loan and credit facility.
This strategic maneuver aims to bolster STKS’s portfolio by introducing a scaled platform that will fortify and diversify its already industry-leading collection of world-class, experiential restaurant concepts.
Established in 1964, Benihana has established itself as a premier operator of unique, experiential brands, presently running 88 company-owned restaurants, with 17 additional franchised or licensed venues in the Americas. This acquisition will elevate ONE Group’s global footprint to 168 establishments, encompassing full-service entertainment and grill restaurants under its four signature experiential and complementary brands.
The transaction is anticipated to inject nearly $575 million in annualized system-wide revenues and generate approximately $70 million in annual run-rate EBITDA prior to synergies. These synergies are projected to reach $20 million per year.
It is estimated that 24 months will be needed post-closing to realize synergies, propelling the company’s pro-forma annualized run rate EBITDA, including synergies, to over $135 million. The completion of this acquisition is expected by the conclusion of the second quarter of 2024.
Strategic Expansion in Focus
Driven by new restaurant launches and long-term growth strategies, ONE Group continues to reap the benefits of its expansion initiatives. The company is dedicated to fueling growth through strategic expansion efforts. In 2023, STKS demonstrated robust unit development with the addition of four new restaurants in the fourth quarter.
These recently opened establishments have enjoyed promising beginnings, solidifying STKS’s confidence in the long-term EBITDA and earnings potential of its development pipeline, offering shareholders unparalleled industry-leading ROIs.
In the year 2024, STKS intends to inaugurate six to eight additional STKs, comprising one or two managed and licensed locations. This emphasizes the heightened flexibility in its pipeline for strategic restaurant launches. STKS envisions a long-term addressable market encompassing 200 global STK restaurants and 200 domestic Kona Grills.
Performance Statistics
Over the past six months, shares of ONE Group have experienced a 26.4% decline, in contrast to the retail-restaurants industry’s 12.7% upswing. Factors contributing to this downward trajectory include wage inflation, augmented marketing expenses, and general operational cost inflation.
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In 2024, the anticipated owned operating expenses as a percentage of owned restaurant net revenue is expected to hover around 83.0%. Earnings projections for fiscal 2024 have dwindled in the last 30 days, reflecting analysts’ apprehensions concerning the stock’s growth trajectory.
Zacks Rank & Notable Choices
ONE Group currently holds a Zacks Rank #2 (Buy).
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The ONE Group Hospitality, Inc. (STKS) : Free Stock Analysis Report
