Golden Gate Capital, a private equity firm, has agreed to purchase the Red Lobster business from Darden Restaurants for $2.1 billion in cash. The agreement also includes other related assets and assumed liabilities.
Darden expects to receive net cash proceeds, after tax and transaction costs, of approximately $1.6 billion, of which approximately $1.0 billion will be used to retire outstanding debt. The remaining net proceeds of approximately $500 million to $600 million will be deployed for a new share repurchase program of up to $700 million in fiscal 2015.
According to Darden, the sale strengthens the company's credit metrics, delivering lower debt levels and reduced outstanding share count. Darden also expects to maintain its current quarterly dividend of $0.55 per share, or $2.20 annually.
The sale comes despite ongoing opposition from investor Starboard Value, whiich has publicly and repeatedly reported that such a move would destroy as much as $800 million in shareholder value.
The definitive agreement, announced May 16, is the result of a highly competitive process designed to maximize the value of the Red Lobster business and better position Darden for success, said Chuck Ledsinger, lead director of Darden's board of directors.
"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 said. “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."