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Tag: Darden Restaurants

  • Red Lobster Chain Sold For $2.1 Billion

    Red Lobster Chain Sold For $2.1 Billion

    Darden Restaurants, Inc., based out of Orlando, Florida, announced yesterday that they would be selling the struggling seafood chain Red Lobster to Golden Gate Capital for $2.1 billion.

    Darden owns several other chains including: Olive Garden, LongHorn Steakhouse, and Capital Grille. They revealed their plans to sell Red Lobster back in December after their sales dropped significantly.

    The Lead Director of Darden’s Board of Directors Chuck Ledsinger said, “Today’s announcement is the culmination of a highly competitive process designed to maximize the value of the Red Lobster business and better position Darden for success.”

    “The structure of the agreement enables us to capture the value of Red Lobster and establish a market validated valuation of its real estate, while also enabling us to avoid the risks associated with continuing to operate the business in the current challenging environment,” Ledsinger added. “As we move forward, we remain committed to building on Darden’s leadership and will continue to focus on optimizing all of the Company’s assets, including its real estate.”

    Many investors, including Starboard Value LP, are arguing the sell saying that Darden should take new approaches to try and raise sells. They have asked Darden to put the sale on hold to meet with investors before going forward.

    Starboard Value Managing Member Jeffrey Smith wrote a letter to Darden’s board of directors on Wednesday stating that this could be the worst possible time to sell the chain. “While we can see how a Red Lobster separation could be convenient and beneficial for management, this could be the absolute worst time to be selling Red Lobster,” Smith wrote.

    Darden explained that they want to sell Red Lobster and focus more of their attention on revamping their Italian chain Olive Garden. 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,” Darden’s chief executive Clarence Otis said in a statement.

    Image via Wikimedia Commons

  • Red Lobster Sold For $2.1 Billion

    Red Lobster Sold For $2.1 Billion

    Darden Restaurants, the parent company behind restaurants such as Olive Garden and LongHorn Steakhouse, today announced that it has sold Red Lobster. Ownership of the seafood restaurant will be transferred to private equity firm Golden Gate Capital for $2.1 billion.

    The deal includes around $1.6 billion in cash. Darden stated that $1 billion of the cash will go straight to reducing the company’s debt obligations. The rest of the money will put toward a share buyback plan that will take place over the coming year.

    The deal is expected to close during the first quarter of 2015. Darden’s board of directors has already approved the sale. Though the sale is not subject to shareholder approval, Darden has filed for a special meeting of shareholders that should take place “as promptly as practicable.”

    According to today’s announcement, Darden had been shopping Red Lobster around for a buyer for quite some time. The company said it made the decision to sell the restaurant because it didn’t want to be responsible for turning around the restaurant’s falling revenue. Darden has been struggling in recent years, as many middle class consumers hit by the economic downturn have cut dining out from their budgets.

    “Over the past months, we have had extensive conversations with our shareholders about Darden and the Company’s strategic direction,” said Clarence Otis, CEO of Darden. “By enabling us to bolster the company’s financial foundation and increase our focus on the Olive Garden brand 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. At the same time, it provides Red Lobster and its dedicated employees and leadership team with a partner who has a strong track record in the industry and is as equally dedicated to Red Lobster’s success. Our board and management team are highly focused on enhancing shareholder value, and we believe this transaction is consistent with the efforts underway to deliver on this responsibility.”

    Image via Red Lobster

  • Red Lobster Closing Rumors Put to Bed

    Red Lobster Closing Rumors Put to Bed

    It looks like Red Lobster fans can relax, just a little. Despite rabid internet rumors that the seafood chain is closing down, owner Darden Restaurants Inc., claim otherwise. The rumors started a few days ago when LA Weekly posted an article about the uncertain future of Red Lobster.

    The article was subsequently edited because it did not get all the facts straight. But one thing is for certain, a lot of people have the seafood lover in them. Since the article was posted on December 23rd (and many articles about the potential closing followed), Red Lobster has been the number one trending topic on Yahoo.

    Of course, Twitter users have also had their say.

    Darden’s Twitter response:

    So what’s the latest story? Is Red Lobster really closing or isn’t it? Not according to Darden, which is one of the largest casual dining companies in the country. They also own Olive Garden, LongHorn Steakhouse and The Capital Grille among others. Darden spokesman, Rich Jeffers, stated that the company does want to sell or spin Red Lobster, however, they have no intention of closing down the restaurant chain.

    The company is worth nearly $7 billion, but the health of their financial future is clearly in jeopardy. The Orlando-based Fortune 500 company had a 31 percent drop in net earnings last quarter alone. Red Lobster currently has 705 operating restaurants in the United States and Canada.

    Image via Facebook

  • Red Lobster Denies Closing Rumors

    Red Lobster Denies Closing Rumors

    Rumors have been swirling recently that Darden Restaurants, Inc., an Orlando-based Fortune 500 company that owns the seafood restaurant chain Red Lobster, will be closing the popular eatery’s doors in 2014. Now, those rumors have been addressed and squashed by Darden executives.

    An annual earnings report released earlier this month indicated that the company would soon be indefinitely closing the 705 Red Lobster restaurants scattered throughout the U.S. and Canada. However, according to Rich Jeffers, Darden’s director of media relations, that isn’t the case. Jeffers said Friday, “Never have we said we would be closing restaurants.”

    The notion that Darden would be closing Red Lobster could have possibly stemmed from a report earlier this year released by Barington Capital Group LP, an investment company now working with Darden to boost profits. Barington stated publicly that their plan for increasing sales for Darden Restaurants, Inc. would include a cut back on specials and promotions offered to customers, as well as money spent on advertising. They also suggested that some of the restaurants may need to be closed.

    According to Barington, the current fiscal year has seen investors in the company acquiring over 2% of the company’s stock, and a 19% drop in annual earnings in 2012. The investment firm also indicated that they believe the issues within Darden Restaurants, Inc. stem from the constant growth in the company’s size.

    The firm showed that Darden spent almost twice as much on advertising as their competitors in the previous fiscal year. Darden and Red Lobster apparently invested 4.8% of their revenue on television ads in 2012 and 2013, compared to the 2.5% spent on average by similar companies.

    Nonetheless, Jeffers assured upset customers that Red Lobster has no intention of closing the franchise entirely; on December 19 Darden announced that it was investigating the possibility of selling the chain or completing a spinoff of the restaurant, but either scenario would simply be a “change in ownership.”

    Red Lobster averaged sales of roughly $2.6 billion this year, and is estimated to be looking at a total revenue of $8.6 billion for the year when combining the profits from all 8 Darden-owned restaurant chains.

    Main image courtesy @redlobster via Twitter.