On Friday, Darden Restaurants (DRI) said it a private equity firm will purchase its Red Lobster chain of seafood restaurants. Investors weren’t happy about the news, sending DRI stock down more than 4% in morning trading.
Golden Gate Capital has agreed to acquire Red Lobster in an all-cash deal valued at $2.1 billion. Red Lobster comprises roughly 30% of DRI sales, but the chain has seen sales decline in recent years. After taxes and transactions expenses, DRI says it will receive $1.6 billion from the Red Lobster sale, which is expected to close in the August quarter, the Wall Street Journal notes.
Proceeds from the Red Lobster sale will be used to retire fund new DRI share buybacks and retire about $1 billion in Darden’s debt.
DRI signaled plans to sell Red Lobster — which has 706 North American locations — late last year. The move was opposed by DRI investors Starboard Value LP and Barington Capital Group LP.
Despite the objections, DRI said in March that it planned to move ahead with selling the Red Lobster chain.
Red Lobster sales fell more than 8% during the March quarter.
Darden stock closed at $ per share on Thursday.
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