Golden Gate gobbles up Red Lobster for $2.1bn

The San Francisco-based firm will buy the seafood restaurant chain from Darden Restaurants.

Golden Gate Capital has agreed to acquire Red Lobster from Darden Restaurants for $2.1 billion, according to a statement.

Golden Gate received debt financing from Deutsche Bank AG, Jefferies and GE Capital and deployed capital from its $3.5 billion Golden Gate Capital Opportunity Fund. The firm will also sell more than 500 Red Lobster restaurant properties to American Realty Capital Properties and will use the proceeds to help finance the acquisition. The deal marks the fourth transaction Golden Gate has completed with American Realty, according to the statement.

“Red Lobster is an exceptionally strong brand with an unparalleled market position in seafood casual dining,” Josh Olshansky, a managing director at Golden Gate said in the statement.

Kirkland & Ellis provided legal counsel to Golden Gate for the transaction, which is expected to close in the first fiscal quarter of 2015.

Darden owns other restaurants such as Olive Garden and Longhorn Steakhouse. Darden’s overall revenue growth has historically been greater than Red Lobster’s revenue growth, which was about 2 percent in fiscal year 2013, according to a Darden presentation. Darden expects to receive about $1.6 billion from the sale, of which about $1 billion will be used to pay off outstanding debt, according to the statement. The remaining $400 million will be used to pay transaction fees and taxes.

Golden Gate restaurant portfolio has included California Pizza Kitchen and On the Border, a Mexican restaurant brand the firm exited last month. The sale of parent company Border Holdings to Argonne Capital Group and Fortress Investment Group generated a more than 3x return multiple, a source familiar with the matter previously told Private Equity International.

Golden Gate also invests in the financial services, industrials and energy, information technology and business services, retail and consumer products, software and technical hardware and telecom sectors, according to its website.

The San Francisco-based firm was founded in 2000 and is led by nine managing directors.