Darden Restaurants Inc. said Monday it has completed its $2.1 billion sale of the 706-unit Red Lobster casual-dining brand to Golden Gate Capital.
Orlando-based Darden said about $1 billion of the net cash proceeds of the deal, announced in May, will be used to retire outstanding debt. The remaining net proceeds of $500 million to $600 million are to be used for a new share repurchase program of up to $700 million in fiscal 2015, the company said.
“The completion of this transaction marks an important milestone in the actions we are taking to improve our operations, reduce costs and focus on opportunities with the highest value-creating potential,” said Clarence Otis, Darden's chairman and chief executive, in a statement. “While we still have work to do, we are making progress in our efforts to enhance performance and shareholder value."
Darden has announced new initiatives in design, menu and technology at its remaining 837-unit Olive Garden division.
The Red Lobster sale has drawn criticism from activist investors, including New York-based Starboard Value L.P., which increased its share holdings this month to 7.1 percent. Starboard has pressed for leadership and directional changes at the company.
Kim Lodrup, chief executive of the new Red Lobster, said in a separate statement Monday, that “as a stand-alone, private company we can focus exclusively on what’s best for Red Lobster and our guests. Our partner, Golden Gate Capital, is known for investing in iconic retail and restaurant brands and helping them unlock value and grow.”
San Francisco-based Golden Gate currently has California Pizza Kitchen and On the Border casual-dining brands in its portfolio and has invested in and sold Romano’s Macaroni Grill.
Josh Olshansky, managing director at Golden Gate, said, "We are excited to have successfully completed the acquisition of Red Lobster, officially beginning our partnership with this iconic brand as it enters into this exciting new chapter of growth.”
Goldman, Sachs & Co. served as Darden's exclusive financial adviser in the sale of Red Lobster and also as financial advisor to Darden's board.
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