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TheStreet Open House

The Ultimate Lobster Sale

Stocks in this article: DRI CBRL

Granted, Red Lobster is not as profitable as Cracker Barrel, and profitability was also in decline. However, Golden Gate Capital is taking advantage of Darden's haste to rid itself of Red Lobster, which has been anchor for Darden's performance in recent years.

Darden has ultimately decided that Red Lobster is either not worth fixing or can't be fixed. That's a shame, because despite its troubles, Red Lobster is still a well-known, formidable brand.

The market did not take too kindly to the sale announcement on Friday, as Darden shares fell more than 4%. Evidently, Barrington's proposals or the notion of a Red Lobster spin-off may have been growing on investors who were evidently not excited by Darden's plan to use of the after-tax sale proceeds ($1.6 billion) to pay down debt ($1 billion) and buy back stock. DRI Chart DRI data by YCharts

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At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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