Olive Garden parent Darden Restaurants to spin off some assets to pay debts

Darden Restaurants announced Tuesday to separate part of the company into a publicly-traded real estate investment trust. Darden will use the proceeds to pay down its debt. 

|
Keith Bedford/Reuters/File
A man talks on his mobile phone in front of the Times Square Olive Garden in New York. Darden Restaurants announced Tuesday to separate part of the company into a publicly-traded real estate investment trust.

Darden Restaurants Inc said it plans to separate some of its restaurants into a publicly traded real estate investment trust as part of changes engineered by activist investor Starboard Value LP.

Shares of Darden, which also reported better-than-expected quarterly profit and revenue, rose almost 6 percent to a record high of $73.40 on Tuesday.

Starboard, while agitating for change at the restaurant operator last year, had called for transferring some of Darden's restaurants into a REIT. The investor's efforts eventually resulted in a revamp of the company's board and management.

Darden said on Tuesday said it would transfer about 430 restaurants, mostly Olive Garden properties, to the REIT this year and lease back most of the properties.

Darden also listed 75 properties for individual sale-lease backs, with most of these deals expected to close by the end of August.

The company, which has more than 1,500 restaurants, said it would use the proceeds from the transactions to pay down about $1 billion of debt.

After completing the conversion, the REIT will distribute profit for the year ending Dec. 31 as dividend, with about 20 percent in cash and the rest in shares of the REIT, Darden said.

Darden's announcement follows retailer Sears Holdings Corp's decision in April to raise more than $2.5 billion by forming a REIT with 254 of its stores.

Department store operator Macy's Inc is also being pushed by several hedge funds to consider options for its real estate, including selling and leasing back some major sites.

The company did not say how much it plans to raise from the REIT and leaseback transactions.

Darden is also looking to sell and lease back its headquarters in Orlando, Florida.

Traffic at Olive Garden rose in March, the first increase since October, but fell again in April and May. Sales, however, rose 14 percent in the fourth quarter ended May 31, partly helped by higher pricing.

The company also forecast a better-than-expected full-year adjusted profit, and said it expected same-restaurant sales to grow 2-2.5 percent.

JP Morgan and Moelis & Co advised Darden on financial matters for the transaction, while Skadden, Arps, Slate, Meagher & Flom LLP was legal advisers.

(Reporting by Sruthi Ramakrishnan and Ramkumar Iyer in Bengaluru; Editing by Simon Jennings and Saumyadeb Chakrabarty)

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Olive Garden parent Darden Restaurants to spin off some assets to pay debts
Read this article in
https://www.csmonitor.com/Business/2015/0623/Olive-Garden-parent-Darden-Restaurants-to-spin-off-some-assets-to-pay-debts
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe