Darden Restaurants inked a $2.1 billion deal on Friday to unload its struggling Red Lobster business to Golden Gate Capital.
Golden Gate may be able to inject some new life into Red Lobster, but the deal is likely to rile up Darden investors.
The company’s shares fell 4%.
Some hedge funds have criticized Darden for how it is handling Red Lobster. Darden originally planned to spin-off the seafood restaurant chain as a separate publicly traded company before deciding to sell Red Lobster to Golden Gate. The sale is not subject to shareholder approval, Darden said.
Starboard, which owns 5.5% of Darden, said the sale to Golden Gate “woefully undervalues Red Lobster and its real estate assets.” Starboard CEO Jeffrey Smith said it’s “truly unbelievable” that Darden directors have the “audacity” to negotiate a sale in spite of shareholder opposition.
Darden expects the sale to Golden Gate Capital will generate $1.6 billion after taxes and transaction costs, money the company plans to deploy to pay down debt, buy back stock and continue paying its dividend.