The ONE Group to acquire Benihana for $365 million

DENVER - The ONE Group Hospitality, Inc. (NASDAQ: NASDAQ:STKS), known for its upscale and polished casual dining venues, announced today the acquisition of Safflower Holdings Corp., the owner of the iconic U.S. teppanyaki and sushi restaurant chain Benihana Inc. The $365 million transaction is set to significantly expand The ONE Group's global presence and financial strength.

The deal, expected to close by the end of the second quarter of 2024, will see The ONE Group's venue count jump from 63 to 168, adding $514 million in trailing twelve-month revenue to its financials.

The acquisition is projected to bring in approximately $575 million in annualized system-wide revenue and about $70 million in annual run-rate EBITDA before synergies, which are estimated at $20 million annually.

Emanuel "Manny" Hilario, President and CEO of The ONE Group, expressed enthusiasm about the acquisition, highlighting Benihana's legacy and cultural significance. He emphasized that the strategic acquisition supports the company's broader strategy to strengthen its portfolio of experiential VIBE restaurant concepts.

The transaction will be financed through a combination of a new $390 million term loan, credit facility, and $160 million in preferred equity. The preferred equity will be primarily issued to Hill Path Capital, whose representatives Scott Ross and James Chambers will join The ONE Group's board of directors upon closing.

This move is anticipated to be immediately accretive to earnings per diluted share, and the combined business is expected to generate meaningful free cash flow, which will enable debt reduction and shareholder-friendly capital allocation.

A conference call and webcast to discuss the transaction details will be held later today at 5:00 PM ET.

The ONE Group operates the STK, Kona Grill, and ONE Hospitality brands, with a focus on VIBE dining. Benihana Inc., the acquisition target, operates the Benihana and RA Sushi brands, with over 100 restaurants under its umbrella.

This report is based on a press release statement. The transaction is subject to customary closing conditions and has been approved by both companies' boards of directors. Deutsche Bank (ETR:DBKGn) Securities Inc. and Stoel Rives LLP advised The ONE Group, while Piper Sandler & Co, Sidley Austin LLP, and Akin Gump Strauss Hauer & Feld LLP advised Benihana.

The ONE Group Hospitality's (NASDAQ: STKS) bold move to acquire Benihana Inc. comes at a time when the company's market cap stands at $127.11 million. Investors have been eyeing the company's financial strength and potential for growth, especially given its recent performance metrics.

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The company's P/E ratio, as of the last twelve months ending in Q4 2023, is adjusted to 21.19, which suggests that investors are willing to pay a higher price for its earnings compared to the industry average. This could be indicative of market confidence in the company's future profitability and strategy execution.

While The ONE Group's revenue has seen a growth of 5.09% over the last twelve months as of Q4 2023, its valuation implies a poor free cash flow yield according to an InvestingPro Tip. This is particularly relevant as the acquisition is expected to generate meaningful free cash flow, which is crucial for the company's plans for debt reduction and shareholder-friendly capital allocation.

Moreover, the company's stock price has experienced significant volatility, with a 36.32% price total return decrease over the last three months. This could signal an opportunity for investors to buy into the company at a lower price point ahead of anticipated growth from the acquisition.

Moreover, an InvestingPro Tip highlights that management has been aggressively buying back shares, which could reflect their confidence in the company's value and future prospects. This aligns with the company's optimistic outlook on the immediate accretion to earnings per diluted share following the acquisition.

For investors looking for deeper insights and additional InvestingPro Tips, there are 11 more tips available that could provide further clarity on The ONE Group's financial health and strategic positioning. To access these tips and gain an investing edge, visit InvestingPro and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

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