Boston, MA 05/19/2014 (wallstreetpr) – Darden Restaurants, Inc. (NYSE:DRI) has agreed to sell the seafood chain Red Lobster for $2.1 billion.
Darden to sell Red Lobster
Darden is selling its seafood chain Red Lobster for $2.1 billion. The seafood chain is being sold to investment firm Golden Gate Capital. Along with the restaurant, the buyer will also receive a real estate companied with it.
The separation plan was announced last year. Since then, several shareholders have been objecting the deal.
Red Lobster was started in 1968. The chain helped in popularising seafood among Americans. It presently has 700 locations in the U.S. and Canada.
According to Darden CEO Clarence Otis, Red Lobster has not been able to attract the higher income customers back. About the declining sales, executives blame several factors one of which is a refusal of the customers to pay the increased prices. Even though the company a more non-seafood dishes to the existing menu, but even that failed to bring in more customers.
Keeping Olive Garden
Darden will keep Olive Garden. The managements seem more potential in Olive Garden. Olive Garden is present in 830 locations. This is an Italian chain. Darden Restaurants, Inc. (NYSE:DRI) is adding some lighter items on the menu along with special dishes like crispy risotto bites.
Opposition to the deal
Activist investor Barington Capital challenged Darden’s decision to sell Red Lobster. Starboard Value also condemns Darden for the decision and not hosting a shareholder meeting. However, Darden said that the deal was subject to shareholder approval.
Darden is expected to receive $1.6 billion after all expenses, which the company will be using to pay a debt.
The deal is expected to close in the first quarter of FY2015. After the news, Darden stock slipped 4%. According to Darden, Darden Restaurants, Inc. (NYSE:DRI) went through the process to maximise the value potential of a spin-off or sale of Red Lobster.
