Thai Union, investors acquire Red Lobster
Red Lobster stakeholder Thai Union and a group of investors have acquired the rest of the Orlando-based restaurant chain from the private equity firm that bought it in 2014.
San Francisco’s Golden Gate Capital, which bought the seafood chain from Orlando’s Darden Restaurants for $2.1 billion in 2014, announced Monday it had agreed to sell the remainder of its stake to the Thailand-based seafood supplier Thai Union, along with an investor group of restaurateurs and hospitality industry executives and Red Lobster management, a news release said.
In 2016, Thai Union paid a combined $575 million for a 25% stake in Red Lobster along with another 24% stake it would be able to convert after 10 years.
San Diego-based restaurant analyst John Gordon said it was a positive development that Red Lobster will be backed by a publicly traded company, Thai Union, that can raise capital.
“This acquisition today improves Red Lobster’s position,” he said. “It doesn’t solve their basic on-the-ground restaurant condition in terms of its needs to
continue to make itself as relevant as possible in the basic casual dining place in the United States, but it makes the foundation a little stronger.”
Red Lobster had more than $355 million outstanding on a term loan reaching maturity next July, according to a Moody’s report in June. Earlier this year, Moody’s cut Red Lobster’s credit rating to Caa1, defined as “poor.”
Financial terms of the deal were not revealed, but the chain of more than 700 restaurants is expected to keep its headquarters in Orlando and be led by CEO Kim Lopdrup and the rest of the current management team.
The new investor group will be named Seafood Alliance and will include restaurant industry veterans and key shareholders Paul Kenny, the former CEO of Asia’s Minor Food, and Rit Thirakomen, CEO and controlling shareholder of Thai chain MK Restaurant Group, the release said.
“We are thrilled to deepen our relationship with Thai Union and add an exceptional new partner in the Seafood Alliance,” Lopdrup said in an emailed statement. “Their investment is a strong endorsement of Red Lobster’s team, strategy and long-term growth potential.”
A representative for Golden Gate Capital told the Orlando Sentinel the company was declining to comment for this story.
“We have enjoyed a highly successful partnership with Red Lobster and are proud to have worked collaboratively alongside
Kim Lopdrup and the management team since 2014, achieving strong returns for our investors,” Josh Olshansky, a managing director at Golden Gate Capital, said in the release.
Earlier in August, Thai Union group CFO Joerg Ayrle suggested on an earnings call that his company could help Red Lobster.
“Look, of course, we are a large shareholder, and it would be irresponsible of us if we would decline discussions and if we would not reach out our hand and help our subsidiary and affiliated companies here,” he said.
Ayrle also discussed costcutting measures at Red Lobster after revenue fell during the coronavirus pandemic.
“We did go through some reduction in force already,” Ayrle said. “We did go for a nearly 30% reduction in overhead cost, and we did go through a massive reduction in marketing expenses.”
He also said the chain needed to get savings on rent.
“Look, maybe we’ll lose some locations if landlords are really not understanding enough. That’s fine, too,” Ayrle said. “We need to keep the pressure on cost.”
Lopdrup told the Orlando Sentinel last week
Red Lobster had tripled its off-premise sales even after reopening a majority of its dining rooms, but did not answer questions about layoffs.
Thai Union’s brands include Chicken of the Sea, John West, King Oscar and others.
In 2015, an Associated Press investigation tied Thai Union to slavery in southeast Asian fishing waters, and the company said it severed ties with contractors accused of using slave labor.
“While Thai Union never knowingly supplied products to customers that were the result of forced labor, we recognize the need to meet a higher standard,” a post on the company’s website said. “Since those reports focused the world’s attention on this important issue, we have implemented a regimen to ensure that we are doing our part to stamp out slavery.”
The post cited reporting from the Associated Press and New York Times on human rights violations in Thailand and the fishing industry.
“Their investigations recounted abuses by some of the sub-contractors Thai Union had employed,” the statement said. “This was a wakeup call for the indus
try, and particularly Thai Union, who has a vision of leadership in the seafood industry.”