Darden Restaurants to sell Red Lobster seafood chain to Golden Gate Capital for $2.1 bn

New York Stock Exchange-listed Darden Restaurants Inc yesterday agreed to sell its struggling Red Lobster seafood restaurant chain to private equity firm Golden Gate Capital for $2.1 billion in cash including debt.

Darden, which also owns Olive Garden, LongHorn Steakhouse, Bahama Breeze and others, expects to receive net cash proceeds, after tax and transaction costs, of approximately$1.6 billion, of which approximately $1billion will be used to retire outstanding debt. 

Darden, based in Orlando, had said in January that it would spin off or sell Red Lobster, after two hedge-fund investors criticised the company for declining sales and wanted divesture of its real estate assets and form a separate company with brands such as Olive Garden and Red Lobster.

The transaction does not require the approval of shareholders.

Clarence Otis, Darden's chairman and CEO, said, "Over the past months, we have had extensive conversations with our shareholders about Darden and the company's strategic direction.  By enabling us to bolster the Company's financial foundation and increase our focus on the Olive Garden brand renaissance program, 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."

Red Lobster has 705 restaurants in the US and Canada and had annual sales of about $2.6 billion in 2013.

"Red Lobster is an exceptionally strong brand with an unparalleled market position in seafood casual dining," said Josh Olshansky, managing director at Golden Gate Capital, which also owns California Pizza.