Darden Restaurants Inc. announced that it has agreed to sell Red Lobster to private equity firm Golden Gate Capital for $2.1 billion in cash, Reuters reported,
Rejecting activist investors who opposed plans to shed the struggling seafood chain, Darden claimed the sale was not subject to shareholder approval and should close in the quarter ending in August.
In midday trading on the New York Stock Exchange, the restaurant's shares were down 4.1 percent at $48.62.
However, the sale or spinoff was opposed by Hedge fund Starboard Value LP, which owns about 5.5 percent of Darden's outstanding shares, since as much as $800 million of shareholder value could be destroyed.
"The announced sale woefully undervalues Red Lobster and its real estate assets," Starboard Chief Executive Officer Jeffrey Smith said in an emailed statement.
In order to vote on the Red Lobster divestiture plan, Starboard was able to successfully urge Darden shareholders to require the company to hold a special meeting. But it has accused Darden of delaying the meeting.
Darden on Friday said it would file a preliminary proxy statement later this month for the special meeting and to convene it "as promptly as practicable."
"It appears that Darden has instead sold Red Lobster in a rushed transaction at a severe discount," Smith said.
In a note titled "Who knew lobsters had middle fingers?", Janney Capital Markets analyst Mark Kalinowski said, "Clearly today's announcement is a thumb in the eye of activist investors."
The move comes as Darden, which also owns Olive Garden, fights to improve its financial performance, CBS reported.
The company has been trying to update the image of its flagship chains since Olive Garden and Red Lobster have been losing customers in recent years.
Darden, based in Orlando, Florida, has said that Olive Garden complements its portfolio of smaller restaurant chains that cater to customers willing to spend more.
