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Done Deal: Red Lobster Restaurant Chain Sold for $2.1 Billion

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Today marks a new chapter for Red Lobster, the struggling seafood chain. Orlando, Fla.-based Darden Restaurants, Inc. has announced that it will sell Red Lobster to the private equity firm Golden Gate Capital in a $2.1 billion cash deal.

Darden, which also owns Olive Garden, LongHorn Steakhouse, Capital Grille and a number of other chains, said in December that it planned to sell Red Lobster, citing disappointing sales.

The Red Lobster deal is expected to close by the summer of 2015, Darden says.

Activist investors, most notably hedge fund Starboard Value LP, have challenged Darden's strategy, arguing that the restaurateur should instead try and improve business through cost reduction and a separation between its struggling mainstream casual dining restaurants -- including Red Lobster and Olive Garden -- and its financially healthy high-end restaurants, such as Capital Grille.

Earlier this week, Starboard Value warned Darden not to sell Red Lobster before a meeting with shareholders was called to discuss the sale. That meeting has yet to be scheduled.

Related: Everything Seems to Be Getting Worse for Company Behind Red Lobster, Olive Garden

"While we can see how a Red Lobster separation could be convenient and beneficial for management, this could be the absolute worst time to be selling Red Lobster," Starboard Value Managing Member Jeffrey Smith wrote in a letter to Darden's board of directors on Wednesday. Like Red Lobster, Olive Garden has been steadily underperforming in recent years.

With the sale of Red Lobster, Darden argues it can now focus on rejuvenating the Olive Garden brand. The company has already made various modifications to the Italian chain -- including a revamped menu and a redesigned logo -- to lure back customers.

“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,” Clarence Otis, Darden’s chief executive, said in a statement.

Golden Gate Capital is no stranger to the restaurant business. The San Francisco-based private equity firm has holdings in California Pizza Kitchen, and On the Border, a casual dining Mexican chain. It sold Romano's Macaroni Grill last year for $55 million. 

Related: Olive Garden Undergoes 'Brand Renaissance' as Investors' Criticism Intensifies

Laura Entis

Written By

Laura Entis is a reporter for Fortune.com's Venture section.