Darden Restaurants, Inc. to Sell Red Lobster for $2.1B (DRI)

Darden Restaurants (DRI) announced on Friday morning that it will be selling its Red Lobster brand of restaurants and other assets to Golden Gate Capital in a $2.1 billion cash deal.

After taxes and transaction costs, Darden expects net cash proceeds of $1.6 billion, and the company will use $1 billion to retire outstanding debt. The remaining amount of cash will be used to repurchase shares in a repurchase program that is expected to buy back as much as $700 million in shares in 2015. The sale is expected to close in the first quarter of 2015.

DRI chairman and CEO Clarence Otis had the following comments about the deal: “Over the past months, we have had extensive conversations with our shareholders about Darden and the Company’s strategic direction. 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. At the same time, it provides Red Lobster and its dedicated employees and leadership team with a partner who has a strong track record in the industry and is as equally dedicated to Red Lobster’s success. Our Board and management team are highly focused on enhancing shareholder value, and we believe this transaction is consistent with the efforts underway to deliver on this responsibility.”

Markets did not react much to the news of the Red Lobster sale, and Darden stock was down 23 cents, or 0.45%, in pre-market trading. YTD, DRI stock is down 4.93%.

DRI Dividend Snapshot

As of Market Close on May 15, 2014

Click here to see the complete history of DRI dividends.