ORLANDO, Fla., May 16 (UPI) -- Darden Restaurants has signed a deal with Golden Gate Capital to sell the struggling seafood chain Red Lobster for $2.1 billion.
Darden seems to have gone against its shareholders' advice and gone ahead with the all cash deal despite activist investor Starboard Value calling the deal a "potential destruction of shareholder value." Chief Executive Clarence Otis said that the deal allows the company to now focus on what it calls the "Olive Garden 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," Otis said in a statement.
Another hedge fund, Barington Capital, had asked Darden to break the company into two -- one company for the mature brands of Olive Garden and Red Lobster and the other for newer and fast growing brands like LongHorn Steakhouse.
After taxes and transaction costs, Darden will have $1.6 billion, $1 billion of which it plans to use to pay off outstanding debts and $600 million to fund a new share repurchase program.
Red Lobster now joins Golden Gate's $12 billion portfolio, which includes California Pizza Kitchen, Eddie Bauer, Pacific Sunwear and Payless Shoe Source.
