Sard supports Golden Gate on Red Lobster acquisition comms

Sard Verbinnen & Co. is supporting Golden Gate Capital on communications as it acquires Red Lobster from Darden Restaurants for $2.1 billion in cash.

ORLANDO, FL: Sard Verbinnen & Co. is supporting Golden Gate Capital on communications as it acquires Red Lobster from Darden Restaurants for $2.1 billion in cash.

Nathaniel Garnick, a principal at Sard, confirmed the agency’s relationship with Golden Gate, but would not elaborate on its communications strategy.

Darden’s communications and PR manager, Erica Ettori, did not disclose what PR firm the company is working with on the deal, which was announced on Friday.

Darden explored various separation alternatives for Red Lobster, one of the company’s eight restaurant chains, along with the value potential of each. These included a spin-off of the Red Lobster business; a sale of the chain; a spin-off of the operating compan and a separate sale of its real estate; and retaining the Red Lobster operating company and separating its real estate.

In the end, the board agreed that the Golden Gate deal would create the most value, according to a release, which included a statement from Clarence Otis, Darden's chairman and CEO. He explained that the decision came after several months of extensive conversations with shareholders about the strategic directions of Darden and Red Lobster.

"By enabling us to bolster the company's financial foundation and increase our focus on the Olive Garden brand renaissance program, we believe this agreement addresses key issues that our shareholders have raised, including the need to preserve the company's dividend and regain momentum at Olive Garden," Otis said in the release. "At the same time, it provides Red Lobster and its dedicated employees and leadership team with a partner who has a strong track record in the industry and is as equally dedicated to Red Lobster's success."

Golden Gate MD Josh Olshansky said in the release that by partnering with Red Lobster CEO-elect Kim Lopdrup and his management team, his company sees "significant opportunities for future growth…to support the long-term success of Red Lobster."

Although Otis noted in his statement that the deal is part of a plan to enhance shareholder value, a group of shareholders are "strongly opposing" it.

In a press release Monday, James Mitarotonda, chairman and CEO of Barington Capital Group, which represents a group of Darden shareholders, said that Red Lobster is being sold at a "fire sale" price. He added that the deal "destroys more value than it creates," noting that other shareholders are also "extremely disappointed" by the transaction.

"In over 14 years of investing, we have never seen a group of directors that have allowed a company to be run with such a blatant disregard for shareholder interests," said Mitarotonda.

The deal is expected to close in the first fiscal quarter of 2015.

In March, Darden reported that Red Lobster’s third-quarter sales fell 8.7% to $611 million, year-over-year. The chain accounted for roughly 31% of Darden’s overall revenue last year, and its restaurant sales have dropped in five out of the last six quarters.

Red Lobster has 706 locations in the US and Canada.

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