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article imageInvestors object to Darden's sale of Red Lobster chain

By Nathan Salant     May 16, 2014 in Business
Orlando - Hedge fund investors in Darden Restaurants objected Friday to a proposed deal to sell the Red Lobster restaurant chain to an investment group.
Starboard Value LP and Barington Capital Group LP were immediately critical of the deal to sell the chain's 700 restaurants in the United States and Canada to Golden Gate Capital for $2.1 billion.
Both Starboard CEO Jeffrey Smith and Barington CEO James Mitarotonda said the proposed sale price was far too low.
Starboard owns 5.5 percent of Darden, according to Cable News Network (CNN).
Darden, which had initially said it would spin-off Red Lobster to concentrate on its more-lucrative Olive Garden chain, said the sale was not subject to shareholder approval, CNN said.
The deal was announced early on Friday, and Darden said it would realize $1.6 billion from the sale to pay off debt, buy back stock and continue to pay dividends.
But Starboard said the sale "woefully undervalues Red Lobster and its real estate assets," CNN said.
"Our suspicions all along have now unfortunately been confirmed -- this sale is the wrong transaction, at the wrong time, for the wrong reasons," Smith said.
Barington, which had been pushing a plan to break Darden into two separate companies, called the deal "unconscionable" and said the financial terms amounted to a "fire sale price."
Golden Gate's managing director, Josh Olshansky, released a statement calling Red Lobster "an exceptionally strong brand," CNN said.
The private equity firm did not announce plans to close any Red Lobster restaurants, CNN said.
But Darden did say that it had contacted dozens of possible suitors to buy Red Lobster since December before agreeing to sell to Golden Gate.
More about red lobster, darden, Chain, Restaurants, Golden Gate
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