ORLANDO, FL
In spite of all the objections from activist investors, Darden Restaurants has finally gone ahead and sold its Red Lobster chain to San Francisco based equity firm Golden Gate Capital for $2.1 billion, according to a press release. Shares took a hit following the announcement, dropping $2.04 to $48.65, an approximate 4 percent decrease as of 1:46 PM ET. Investors are naturally on edge; is further activism ahead?
Some analysts say yes. Institutional shareholders are supporting more activists, and since Darden rushed the sale before holding its special meeting for shareholders, there might be more concerns ahead for the company.
Last month, hedge fund Starboard, who led the charge against Darden’s sale or spin-off of Red Lobster, won consent from 54% of Darden shareholders to call a special meeting within 60 days. Starboard has continually advised Darden that the company’s plans to either sell or spin-off Red Lobster is not in the best interest of shareholders and could seriously lower the stock’s value, while also depriving the parent company of almost half of its real estate.
Darden still sees more potential in its Olive Garden restaurants. Clarence Otis, Darden’s Chairman and CEO, commented, “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.”
Chuck Ledsinger, Lead Director of Darden’s Board of Directors said that the sale is “the culmination of a highly competitive process designed to maximize the value of the Red Lobster business” and will “better position Darden for success.”
The sale, which was reportedly unanimously approved by Darden’s Board of Directors, is expected to close in early 2015 and provide the company with $1.6 billion in cash. Approximately $1 billion will be used to retire outstanding debt.
What’s next for Starboard? Will Darden continue to defy activist shareholders?
Stay tuned to DeliMarket TV as we continue our coverage on Darden Restaurants.
