Darden Defies Hedge Funds With Red Lobster Sale Plan

May 16 2014 | 10:59am ET

Activist hedge fund Starboard Value warned investors this week that Darden Restaurants appeared poised to move forward with a plan to sell or spin-off its Red Lobster chain regardless of shareholder opposition, fears that were confirmed today.

Darden announced a $2.1 billion deal to sell Red Lobster and some of its real-estate assets to private-equity firm Golden Gate Capital. The company also said it would proceed with a special meeting called for by Starboard Value, but that it could complete the sale even if shareholders vote against the deal.

Starboard Value and fellow activist Barington Capital Group have argued that selling Red Lobster on its own would cost shareholders nearly $1 billion in value. The two have advocated for a much more radical breakup plan, and have vowed to seek the ouster of Darden's board if it moves forward with the Red Lobster plan without shareholder approval.

Darden yesterday defended the Golden Gate sale, saying it chose that option after a "robust process." The company plans to use the proceeds from the sale, expected to close no later than the end of August, to pay down debt and fund a share buyback program.


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