Darden Restaurants announced the sale of its Red Lobster business for $2.1 billion on Friday. San Francisco based private equity firm Golden Gate Capital will purchase of the popular seafood franchise and related assets. The bulk of the sale’s proceeds will be used to settle outstanding debt.
“Today’s announcement is the culmination of a highly competitive process designed to maximize the value of the Red Lobster business and better position Darden for success,” said lead director of Darden’s board Chuck Ledsinger in a statement.
According to the announcement, the purchase price is nine times Red Lobster’s 12-month earnings ending on April 27. The sale is expected to close in early 2015 and provide the company with $1.6 billion in cash. About $1 billion will be used to retire debt, the remaining funds will be used to repurchase shares.
The company has been mulling either the sale or spin-off of its Red Lobster brand due to the chain’s inability to move up-market. On a December conference call with shareholders, Darden CEO Clarence Otis announced the pending sale of Red Lobster as part of an effort to increase the company’s value.
Golden Gate Capital has stakes in California Pizza Kitchen, Payless ShoeSource, and Express clothing stores.