The move comes at the heels of investors and stock holders recommending to upper management that they hold meetings about the sale prior to going through with it. Management felt that the need to inform investors wasn't necessary -- as no meeting was ever set before going into talks with Golden Gate Capital.
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.
"By establishing two independent companies, a separation will better enable the management teams of each company to focus their exclusive attention on their distinct value creation opportunities," said Darden's CEO Clarence Otis in a statement.
The idea to split up the company into three separate groups has been thrown around for months now. Red Lobster and Oliver Garden chains that Darden was in charge of have been struggling for sales -- while newer restaurants for the company such as Longhorn Steakhouse have been thriving. Investors were looking into the idea of having Red Lobster and Olive Garden stay one branch, while Longhorn Steakhouse and Capitol Grille consist of the second, and the third hold onto real estate investments.
However, Darden instead decided to take less drastic measures. "As a stand-alone company, we will be free to focus in a more single-minded manner on the many current and prospective guests who find what Red Lobster brings to the marketplace highly relevant," newly selected Red Lobster CEO Kim Lopdrup said in a statement. "A spinoff will also allow us to target our efforts and investments on value-creation opportunities that may be material to a stand-alone Red Lobster but not to Darden overall."
In a report by Entrepreneur -- 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.
The Red Lobster deal is expected to close by the summer of 2015, Darden says.