Darden Restaurants said Friday that it would sell Red Lobster to private equity firm Golden Gate Capital for $2.1 billion in cash, defying activist investors who opposed plans to shed the struggling seafood chain.
Darden said the sale was not subject to shareholder approval and should close in the quarter ending in August. Its shares closed down 4.3 percent at $48.49.
Hedge fund Starboard Value, which owns about 5.5 percent of Darden’s outstanding shares, opposed a sale or spinoff of Red Lobster, saying it could wipe out as much as $800 million of shareholder value. “The announced sale woefully undervalues Red Lobster and its real estate assets,” Starboard chief executive Jeffrey Smith said Friday.
Starboard successfully led a shareholder effort to force Darden to hold a special meeting and vote on the Red Lobster divestiture plan. But the meeting has not yet been set by Darden, and some shareholders are concerned the deal will close before investors can weigh in.
Another activist investor, Barington Capital Group, which represents a group of shareholders that hold more than 2 percent of Darden, had pressed Darden to put its more-mature Red Lobster and Olive Garden chains into one company and its higher growth restaurants, including LongHorn Steakhouse and Capital Grille, into another.
Barington chief executive James Mitarotonda said the deal represented a “fire sale” price and criticized the company for being unresponsive to shareholder concerns.
In a note titled “Who knew lobsters had middle fingers?” Janney Capital Markets analyst Mark Kalinowski wrote: “Clearly today’s announcement is a thumb in the eye of activist investors.”
● A portfolio manager for one of the nation’s largest hedge funds was sentenced to 31 / 2 years in prison for his insider-trading conviction, although a judge cited his overall good character as he showed him leniency. U.S. District Judge Richard J. Sullivan in Manhattan described Michael Steinberg as generous and thoughtful but said he must go to prison for serious “crimes that go to the heart of what it is to live in an honest society.” Steinberg, 42, was convicted in December of five conspiracy and securities fraud charges related to trades made on two technology stocks, Dell and Nvidia, between 2007 and 2009. The government said those trades produced illegal profits of at least $1.8 million. The judge also fined Steinberg $2 million and ordered forfeiture of more than $365,000.
● Anheuser-Busch did not discriminate against a former executive by paying her significantly less than a male predecessor, a jury of seven women and five men in St. Louis decided. Counting bonuses and stock options, Francine Katz earned about $1 million annually after her 2002 promotion to vice president of communications and consumer affairs and appointment to the company’s influential strategy committee. But Katz’s base salary was half that of John Jacob, a former National Urban League president and Anheuser-Busch board member. The company argued that Katz’s salary, benefits and bonuses compared favorably to those in similar positions at other large U.S. corporations and that Jacob had considerably more responsibilities, including an informal role as an adviser to former chief executive August Busch III.
● The company buying the assets of a railroad responsible for a fiery oil train derailment that claimed 47 lives in Lac-Mégantic, Quebec, plans to resume oil shipments once track safety improvements are made, the firm’s top executive said. John Giles, president and chief executive of Central Maine and Quebec Railway, said he hopes to have an agreement with Lac-Mégantic officials within 10 days that would allow the railroad to ship non-hazardous goods. The company plans to spend $10 million on rail improvements in Canada in the next two years with a goal of resuming oil shipments in 18 months, he said.
— From news services