Darden Restaurants is selling its Red Lobster chain to investment firm Golden Gate Capital in a $US2.1 billion ($A2.2 billion) cash deal. The company, which also owns Olive Garden, had announced late last year that it planned to either spin off or sell Red Lobster to improve its financial performance. Both Olive Garden and Red Lobster have been losing customers in recent years, even as the company changed the menus and marketing campaigns to win back business. Part of the problem is the g
rowing popularity of chains like Chipotle and Panera, where customers feel they can get the same quality of food without having to pay as much or wait for table service.
Red Lobster, which opened in 1968, helped popularise seafood among Americans and today has about 700 locations in the US and Canada.
The first restaurant in Lakeland, Florida, boasted a menu including a half a dozen oysters for 65 cents and platters with frog legs and hush puppies for $US2.50.
As the chain suffered sales declines more recently, Darden executives blamed a variety of factors, including a refusal among customers to swallow price hikes.
In 2012, for instance, executives cited a $US1 price hike for its “Festival of Shrimp” special in explaining a quarterly decline in sales.
More recently, the company tried expanding Red Lobster’s menu to include more non-seafood dishes in a bid to attract a wider array of customers. The efforts didn’t take hold.
After the transaction costs, Darden says it expects proceeds of $US1.6 billion, of which $US1 billion will be used to retire outstanding debt.
The company expects the deal to close in its first fiscal quarter of 2015.
Golden Gate Capital made a $US1.5 billion deal to sell the Red Lobster real estate to American Realty Capital Properties, then lease it back.
Its other investments include California Pizza Kitchen, Payless ShoeSource, and Eddie Bauer.
Shares of Darden, based in Orlando, Florida, fell nearly four per cent to $US48.70 in premarket trading.
AP
