Darden Restaurants to Spin Off 424 Restaurants into REIT

by Katie Sloan

Orlando, Fla. — The board of directors for Darden Restaurants Inc. (NYSE: DRI) has approved the tax-free spin-off of select real estate and restaurant assets into Four Corners Property Trust Inc. Darden hopes to raise as much as $1 billion with the spin-off that will put 424 restaurants into the REIT.

Darden Restaurants owns and operates more than 1,500 restaurants that generate $6.8 billion in annual sales. Employing 150,000 people and based in Orlando, Darden’s restaurant brands include Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, The Capital Grille, Eddie V’s and Yard House.

Darden intends to use proceeds from the sale-leaseback of select real estate properties, debt financing from FCPT and Darden’s balance sheet cash to retire approximately $1 billion in debt. Four Corners will become an independent, publicly traded REIT that will trade on the New York Stock Exchange under the moniker FCPT, which the Securities and Exchange Commission recently approved.

“Today’s announcement is one of the final steps in the spin-off transaction, which will allow us to optimize the value of a significant portion of our captive real estate while also positioning two companies for success,” says Gene Lee, CEO of Darden Restaurants. “Among other advantages, Darden will benefit from an improved capital structure and strong financial position ready to meet the short- and long-term needs of the business while maintaining our investment-grade credit profile.”

Darden expects to distribute all of the FCPT shares on Nov. 9 to Darden shareholders, and no action is required by Darden shareholders to receive their FCPT shares. Upon close of the tax-free spin-off that will satisfy U.S. federal income tax requirements, Darden shareholders will retain their Darden shares and will receive one FCPT share for every three Darden shares held. Shareholders will also receive cash for fractional shares.

Skadden, Arps, Slate, Meagher & Flom LLP and Hogan Lovells US LLP are representing Darden Restaurants in the spin-off. J.P. Morgan and Moelis & Co. are serving as financial advisers.

In addition to the spin-off, Darden Restaurants has put up dozens of its other restaurants up for sale, including its headquarters building — 1000 Darden Center Drive in Orlando, according to the Orlando Sentinel.

The stock price of Darden Restaurants closed on Wednesday, Oct. 21 at $62.75 per share, up from $49.52 per share at this time last year.

— John Nelson

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