Red Lobster Going to Private Equity in Darden Sale

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May 16 (Bloomberg) -- Stephen Anderson, analyst at Miller Tabak & Company, examines the deal by Darden Restaurants to sell the Red Lobster chain to Golden Gate Capital for $2.1 billion. He speaks on Bloomberg Television’s “Market Makers.”

They succeeded in selling red lobster?

What's i think for star board -- i think for starboard the battle is lost but i don't think the war is over.

There are still call for a special shareholders meeting.

It is supposed to close in the august fiscal quarter fordarden.

I suspect the focus of any special meeting to replace board members of garten.

A peer firm bob evans -- and i would not be surprised to see something similar happened to darden.

Is darden getting good value for the franchise question mark fair valuation is in the low to billion dollar range we were looking at for potential sale price.

Roughly eight to nine times trailing ebitda.

Within that, and includes a little over $800 million in implied real estate value from the company-owned restaurants.

You see a lot of the red lot there's may be shut down or sold?

They have experience in the restaurant area.

They own california pizza kitchen, on the border, macaroni grill.

They will go through all the company assets and see which ones will be closed and engage in its own turnaround operations.

The good news is darden already completed a lot of the requirement.

They refreshed restaurants over the past four years.

But it has not turned around and sales.

Really abysmal sales.

Down eight of the last minute quarters.

And red lobster, it is not exactly a desirable brand in terms of its image.

That is absolutely right.

If you look in relation to some of the other darden brands, red lobster is the one failing really to attract younger customers.

As well as those who make higher incomes.

Starboard explicitly said it wanted darden to hold a shareholder vote on a sale or spinoff of red lobster.

Why would the darden board and management turnaround and effectively pulled them in the eye and say we are doing it whether you like it or not.

I think darden was facing pressure to show up with that balance sheet.

Their focus right now is really trying to turn around the olive garden brand which, i mean, it is the flagship brand.

It really has to rely on olive garden to help finance some of the newer brands.

Those all fair points, of course.

That a sale to golden gate would not have been possible after a shareholder vote?

They need to shore up capital, sure, but presumably there is interim financing available.

If golden gate was interested today presumably it would be interested two weeks from now.

That is also a valid point.

I think what star borard was after with a more comprehensive break above darden.

The larger brand of specialty restaurant brands.

But our concern but that proposal is restaurant food brands -- if they had gone their own separate ways they would have to arrange their own financing in their growth would have been compromised.

I want to ask a broader question -- this is a segment that has -- is troubled broadly as well.

Sort of the upper end of fast food.

We've seen rapid growth of chipotles and five guys of the world.

What can the olive garden red lobsters, what is the outlook?

What you really have to do is focus in on value and some core menu items to keep customers coming back.

But also what you have to do is try to attract the younger customer as well.

Things like having post dinner entrees or small plates, that could help gain younger people.

What chipotle has done over the past couple of years -- that is something they have to look at as well.

This text has been automatically generated. It may not be 100% accurate.


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