Darden Restaurants, the company behind Red Lobster, has signed a deal with Golden Gate Capital to sell the struggling chain for $2.1 billion. The sale is not subject to shareholder approval, and the investment firm Starboard (which owns 5.5 percent of Darden) is none-too-pleased, saying Darden is trying to "rush an irreversible and potentially value-destructive...sale." Starboard believes the deal could affect $800 million in shareholder value.
Darden also owns other major chains like Olive Garden, LongHorn Steakhouse, and The Capital Grille. Originally, Darden was considering taking Red Lobster public as its own entity. Barington Capital was urging Darden to spin off the companies into two sections: one for mature brands (Olive Garden, Red Lobster) and another for faster growing, more recent brands (LongHorn Steakhouse, Bahama Breeze.) Darden decided against both options by forcing the sale to Golden Gate. The profits from the sale (expected to be $1.6 billion, post taxes and fees) will go to paying down Darden stock, reacquiring stock, and paying dividends.
As for what will become of Red Lobster? Well, Golden Gate has some serious work to do. Sales have plummeted 8.8 percent since January 2013. Though Golden Gate has not announced plans to close any restaurants yet, closures are likely as the private equity firm works to rebuild Red Lobster into their former fishy glory. While Golden Gate called Red Lobster "an exceptionally strong brand", stocks are down 4.46 percent so far today (at time of publishing) and 10.61 percent year to date:
Golden Gate has not yet replied to The Wire's inquiry about what will become of the delicious cheesy biscuits, so we can assume they will remain a staple on Red Lobster tables and in our tummies.