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Stock Market & Financial Investment News

News Breaks
May 19, 2014
08:05 EDTDRIBarington Group announces opposition to Darden's sale of Red Lobster
In a statement regarding the recent sale, Barington Group CEO James Mitarotonda said, "It is unconscionable that the Darden Board would allow the Company to sell its Red Lobster business for what amounts to a 'fire sale' price after shareholders clearly indicated that they did not want the Company to enter into a transaction unless it was subject to their approval. While the announced deal reinforces the value of Darden's vast real estate assets and the benefits of establishing separate brand-focused operating companies, as structured, we believe it destroys more value than it creates. Given the market's strongly negative reaction to the announcement, it appears that other shareholders are also extremely disappointed by the transaction... After accounting for the $1.5B sale-leaseback, Golden Gate Capital is paying only approximately $600M for Red Lobster's restaurant operations. Based on Red Lobster's pro forma EBITDA of approximately $115M, it appears that Golden Gate is paying less than 5.5x pro forma EBITDA. In comparison, Darden's mature brand competitors, as stand-alone entities, trade at 9x to 10x EBITDA. The transaction also generates approximately $500M of taxes and transaction costs that could be avoided if the Board proceeded with alternative restructuring opportunities that Barington and other shareholders have recommended."
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