Red Lobster

Darden sells Red Lobster to Golden Gate Capital for USD2.1bn

Darden Restaurants has agreed to sell its Red Lobster business and certain other related assets and assumed liabilities to Golden Gate Capital for USD2.1 billion in cash.   

Darden expects to receive net cash proceeds, after tax and transaction costs, of approximately USD1.6 billion, of which approximately USD1.0 billion will be used to retire outstanding debt. 
 
The remaining net proceeds of approximately USD500 million to USD600 million will be deployed for a new share repurchase program of up to USD700 million in fiscal 2015. 
 
In addition to strengthening the company's credit metrics, with the lower debt levels and reduced outstanding share count, Darden expects to maintain its current quarterly dividend of USD0.55 per share, or USD2.20 annually. 
 
The agreement is the culmination of a process to maximise the value potential of a sale or spin-off of Red Lobster and its real estate assets.  As part of this process, the company and its advisors directly contacted a broad universe of potential financial and strategic buyers to purchase the Red Lobster business.  In addition, a significant number of real estate buyers were also contacted to facilitate attractive sale-leaseback financing for the purchase of the Red Lobster business.
 
Chuck Ledsinger, lead director of Darden's board of directors, says: "Today's announcement is the culmination of a highly competitive process designed to maximise 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.  As we move forward, we remain committed to building on Darden's leadership and will continue to focus on optimising all of the company's assets, including its real estate."   
 
Clarence Otis, Darden's chairman and CEO, says: "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 programme, 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.  At the same time, it provides Red Lobster and its dedicated employees and leadership team with a partner who has a strong track record in the industry and is as equally dedicated to Red Lobster's success.  Our board and management team are highly focused on enhancing shareholder value, and we believe this transaction is consistent with the efforts underway to deliver on this responsibility."

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