Red Lobster to be Sold
in $2.1 Billion Deal

May 16 Darden’s Restaurants will sell it’s Red Lobster chain to the private equity firm Golden Gate Capital for $2.1 billion. The deal, which developed over the last five months, followed plans to spin off Red Lobster seafood chain as a publicly traded company. The sale includes 680 Red Lobster restaurants and the company’s large real estate holdings. The 46-year-old restaurant chain is the root of the Darden company’s dining empire.

The spin-off deal would have been a hard sell to investors according to some. The Red Lobster business has been declining rapidly. Red Lobster same store sales declined 8.8% in the first three months of 2014. Olive Garden, another Darden’s company, saw a 5.4% decline in the same period.

A Golden Gate Capital representative described Red Lobster as a strong brand in the seafood casual dining sector. Golden Gate Capital plans to keep all 680 restaurants open.

Others in the industry say the decline in sales at Red Lobster reflect the changing dining habits of Americans. There is, they say, a shift away from the family sit down dining experience that may be a 45-minute event at a higher price point. There is a trend toward the faster turn around restaurants with a lower price point. Darden’s has been one of the largest sit-down, family-style restaurant companies in the country.

By selling Red Lobster, Darden will now be able to focus on fixing Olive Garden.

Golden Gate received an undisclosed amount of financing from Deutsche Bank, Jefferies and GE Capital and did a $1.5 billion sale-leaseback deal with American Realty Capital Properties (ARCP) for more than 500 Red Lobster properties. Darden contacted about 70 possible suitors for Red Lobster beginning in December and contacted about two dozen potential real estate buyers.