Golden Gate Inks $2.1 Billion Deal To Buy Red Lobster

Darden Restaurants announced Friday that it had agreed to sell its 700-unit Red Lobster chain and related real estate assets to private equity firm Golden Gate Capital for $2.1 billion in cash. Darden said the sale—which defies activist investors who opposed plans to shed the struggling seafood chain— was not subject to shareholder approval and should close in the quarter ending in August.

Darden also reached out to real estate buyers for sale-leaseback financing for the business. San Francisco-based Golden Gate has a deal already in place to reduce its exposure to Red Lobster’s real-estate assets. The firm has struck a $1.5 billion sale-leaseback transaction with American Realty Capital Properties for more than 500 Red Lobster restaurants. In the deal, also announced Friday, Golden Gate sells the land and building to ARCP and leases back by paying rent.

Red Lobster, which accounted for about 31% of Darden’s total revenue in 2013, has been Darden’s worst-performing chain; sales at established restaurants have fallen in five of the last six quarters. Removing Red Lobster from its portfolio frees Darden’s management to focus on reinvigorating Olive Garden, which is the company’s leading revenue generator, and six other brands.

“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,” said Clarence Otis, Darden’s chairman and CEO, in a statement.