Darden Restaurants (NYSE: DRI) has agreed to sell the Red Lobster chain to private equity firm Golden Gate Capital in an all-cash deal worth $2.1 billion.
The move is Darden's attempt at reshaping its portfolio which also includes Olive Garden, LongHorn Steakhouse, The Capital Grille and Seasons 52.
Darden announced late last year that it would spin off Red Lobster from the company's other restaurants, which accounts for 30 percent of Darden's revenue. The seafood chain has lagged behind Darden's other chains, with same-store sales plunging 8.8 percent in the most recent quarter. Red Lobster is the nation's largest sit-down seafood dining chain with 705 restaurants in the United States and Canada. Sales last year were about $2.6 billion, but the current quarter saw same-restaurant sales decline, with revenue down by 4.5 percent.
Darden expects the sale to gain net proceeds of $1.6 billion. The transaction is expected to close in fiscal 2015 during the first quarter, which ends in August.
Red Lobster has suffered in recent years due to a variety of factors, including rising seafood costs and fewer Americans dining out. More recently, the company tried to attract a wider array of customers by adding more non-seafood dishes to Red Lobster's menu, but those efforts didn't pay off. Red Lobster, in particular, is increasingly unable to attract the higher-income customers Darden caters to with its chains including Olive Garden and LongHorn Steakhouse.
Earlier this month, Darden Restaurants said it would close all combination Olive Garden and Red Lobster restaurants, as the company moved forward with plans to sell the Red Lobster brand. The combination restaurants were launched three years ago in smaller markets throughout Georgia, South Carolina, North Carolina and Florida. There were six locations built, each with separate entrances and dining rooms, but shared kitchen, bar space and restrooms. Two of the combination restaurants have been shut down, and the four other locations will be converted into stand-alone Olive Gardens.
-See this Darden press release
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