Darden Restaurants, Inc., based out of Orlando, Florida, announced yesterday that they would be selling the struggling seafood chain Red Lobster to Golden Gate Capital for $2.1 billion.
Darden owns several other chains including: Olive Garden, LongHorn Steakhouse, and Capital Grille. They revealed their plans to sell Red Lobster back in December after their sales dropped significantly.
The Lead Director of Darden’s Board of Directors Chuck Ledsinger said, “Today’s announcement is the culmination of a highly competitive process designed to maximize the value of the Red Lobster business and better position Darden for success.”
“The structure of the agreement enables us to capture the value of Red Lobster and establish a market validated valuation of its real estate, while also enabling us to avoid the risks associated with continuing to operate the business in the current challenging environment,” Ledsinger added. “As we move forward, we remain committed to building on Darden’s leadership and will continue to focus on optimizing all of the Company’s assets, including its real estate.”
Many investors, including Starboard Value LP, are arguing the sell saying that Darden should take new approaches to try and raise sells. They have asked Darden to put the sale on hold to meet with investors before going forward.
Starboard Value Managing Member Jeffrey Smith wrote a letter to Darden’s board of directors on Wednesday stating that this could be the worst possible time to sell the chain. “While we can see how a Red Lobster separation could be convenient and beneficial for management, this could be the absolute worst time to be selling Red Lobster,” Smith wrote.
Darden explained that they want to sell Red Lobster and focus more of their attention on revamping their Italian chain Olive Garden. We believe this agreement addresses key issues that our shareholders have raised, including the need to preserve the company’s dividend and regain momentum at Olive Garden,” Darden’s chief executive Clarence Otis said in a statement.
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