Federal regulators and Darden Restaurants Inc.’s board of directors have each approved the casual-dining operator's real estate spin-off, paving the way for the separation to take place next month.
Darden shareholders will receive shares in the real estate investment trust, Four Corners Property Trust Inc., which will become a publicly traded real estate investment trust, or REIT.
“Today’s announcement is one of the final steps in the spin-off transaction, which will allow us to optimize the value of a significant portion of our captive real estate while also positioning two companies for success,” Darden CEO Gene Lee said in a statement. Darden would benefit from an improved capital structure and stronger financial position, he said.
Four Corners “will be well positioned to efficiently dedicate financial resources and access capital markets to provide an attractive yield to shareholders with the immediate ability to grow and diversify,” Lee said.
Darden expects to distribute Four Corners shares on Nov. 9, based on Darden shareholders as of 5 p.m. EST on Nov. 2. Darden shareholders will retain their Darden shares and receive one share of Four Corners for every three Darden shares held. The deal is expected to be tax-free to shareholders.
Four Corners Property Trust will trade on the New York Stock Exchange under the ticker symbol “FCPT.”
Darden is spinning off 424 of its properties into the real estate investment trust and will use funds from the deal to pay about $1 billion in debt. The company created FCPT and then sold the properties to the trust and leased them back in a sale-leaseback deal.
In so doing, Darden hopes to create shareholder value, because shareholders will get stock in Darden and in the real estate. Investors believe that restaurants that own real estate don’t get credit for those assets among Wall Street stock traders. REITs typically trade at higher valuations than do restaurant chains.
The activist investor Starboard Value LP had pushed for a real estate spin-off during a proxy fight last year. The company won all 12 seats to Darden’s board last fall, and it quickly began examining the idea.
Darden operates seven casual dining brands, including Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, The Capital Grille, Eddie V’s and Yard House. Combined the company has more than 1,500 restaurants that generate $6.8 billion in annual sales.
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