Darden is environment Red Lobster adrift though betting it can still spin around Olive Garden’s fortunes.
The company, formed in Orlando, Florida, pronounced Friday that it would sell a seafood sequence and a concomitant genuine estate to investment organisation Golden Gate Capital in a $2.1 billion money deal. The proclamation came notwithstanding objections from some shareholders to a devise to apart Red Lobster, that was announced late final year.
Olive Garden and Red Lobster have been losing business in new years, even as they altered their menus and selling campaigns to win behind business. Part of a problem is a flourishing recognition of places like Chipotle and Panera, where business feel they can get a same peculiarity of food but profitable as most or watchful for list service.
But Darden CEO Clarence Otis has drawn a eminence between Red Lobster and Olive Garden.
Otis pronounced Red Lobster in sold is increasingly incompetent to attract a higher-income business Darden caters to with a some-more successful chains, that embody Longhorn Steakhouse, The Capital Grille and Seasons 52.
Red Lobster, that non-stop in 1968, helped popularize seafood among Americans and currently has about 700 locations in a U.S. and Canada. The initial grill in Lakeland, Florida, boasted a menu including half a dozen oysters for 65 cents and platters with frog legs and hush puppies for $2.50.
As it suffered sales declines some-more recently, executives blamed a accumulation of factors, including a refusal among business to swallow cost increases. In 2012, for instance, executives cited a $1 cost travel for a Festival of Shrimp special in explaining a quarterly decrease in sales.
More recently, a association attempted to attract a wider array of business by adding some-more non-seafood dishes to Red Lobster’s menu. The efforts didn’t take hold.
Darden sees some-more intensity in regulating Olive Garden, that has about 830 locations. The association recently reworked a trademark for a Italian sequence and has been adding lighter menu equipment and smaller dishes like crispy risotto bites that it says simulate eating trends.
Still, affordability is an ongoing emanate opposite a industry, and Darden has been delayed to residence it. At a tallness of a downturn, for instance, Applebee’s introduced a 2-for-$20 understanding that valid so renouned it finished adult apropos a menu fixture.
Activist financier Barington Capital had challenged Darden’s skeleton to sell Red Lobster, observant a association should apart Olive Garden and Red Lobster as a span from a other chains, that also embody Bahama Breeze, Eddie V’s and Yard House.
Barington pronounced in a matter that Darden’s preference was “unconscionable” given a concerns voiced by shareholders. Earlier this week, Starboard Value also cursed Darden for loitering a special assembly of shareholders on a plans.
Darden remarkable that a understanding is not theme to shareholder approval.
After a transaction costs, Darden pronounced it expects deduction of $1.6 billion, of that $1 billion will be used to retire debt. The association pronounced it expects a understanding to tighten in a mercantile initial entertain of 2015, that is this summer.
Golden Gate Capital done a apart $1.5 billion understanding to sell Red Lobster’s genuine estate to American Realty Capital Properties, afterwards franchise it back. Its other investments embody California Pizza Kitchen, Payless ShoeSource and Eddie Bauer.
Shares of Darden Restaurants Inc. were down 4 percent during $48.49.
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