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Here’s a look at other restaurant analyst notes on the deal:

Stephen Anderson, Miller Tabak + Co.

“Golden Gate Capital is no stranger to restaurant investments; in the past five years, the fund has purchased California Pizza Kitchen and two former brands owned by Brinker International: Romano’s Macaroni Grill (now owned by Ignite Restaurant Group) and On The Border.”

He added that his team had modeled a $2.3 billion price for Red Lobster, including $845 million in implied real estate value. The resulting $2.1 billion price is about nine times the earning before interest, taxes, depreciation and amortization valuation for the trailing 12 months through February, he said.

The deal, Anderson added, gives Darden an opportunity to “(1) strengthen its balance sheet; and (2) turn operational focus toward turning around operations at the flagship Olive Garden concept.”

Lynne Collier, Sterne Agee

“We believe that the sale of Red Lobster is a long-term positive for DRI as it reduces the volatility of the company's financial performance and will provide for reduction in debt,” Collier said. “…The divesting of Red Lobster is a step in the right direction in improving DRI's long-term financial performance and improves the outlook for dividend.”

David Palmer, RBC Capital Markets

“The net impact of this transaction is that Darden will be a high dividend yielding company without the volatility and ongoing earnings drag from Red Lobster,” Palmer said.

He estimated that Olive Garden will represent about 60 percent of Darden’s revenue after the sale. Palmer added that investors would like to see more evidence that Olive Garden can drive same-store sales growth in the low single digits.

Sara H. Senatore, Bernstein Research

General and administrative costs for Darden should be reduced, Senatore noted. “DRI is now targeting more significant G&A cost savings, which will be critical in our view,” she wrote.

David Tarantino, Robert W. Baird & Co.

While Tarantino’s team was encouraged that Darden’s proposed Red Lobster deal is at a “reasonable multiple,” he added that, “we still believe the path to creating long-term shareholder value lies within DRI's ability to drive better core operating performance for remaining brands.”

Jeffrey A. Bernstein, Barclays Capital

Darden was “prudent” in its plan to use net proceeds from the Red Lobster sale to retire debt and repurchase stock, Bernstein said.

“Absent recent activist involvement, we believe investors would have appreciated the strategic merit of such a transaction; monetizing the most volatile brand, while allowing for renewed focus on resurrecting the Olive Garden brand,” Bernstein said.

After taxes and transaction costs, Darden said Friday it expects to receive net proceeds of $1.6 billion, of which about $1 billion would be used to retire outstanding debt. The remaining $500 million to $600 million would be deployed for a share repurchase program of up to $700 million in fiscal 2015, the company said.

In addition to Red Lobster and Olive Garden, Darden also owns and operates LongHorn Steakhouse and brands within its Specialty Restaurant Group, including Yard House, Bahama Breeze, Seasons 52, The Capital Grille and Eddie V’s.

Contact Ron Ruggless at ronald.ruggless@penton.com.
Follow him on Twitter: @RonRuggless