(Reuters) - Darden Restaurants Inc
Darden said the sale was not subject to shareholder approval and should close in the quarter ending in August. Its shares were down 4.1 percent at $48.62 in midday trading on the New York Stock Exchange.
Hedge fund Starboard Value LP, which owns about 5.5 percent of Darden's outstanding shares, opposed a sale or spinoff of Red Lobster, saying it could destroy as much as $800 million of shareholder value.
"The announced sale woefully undervalues Red Lobster and its real estate assets," Starboard Chief Executive Officer Jeffrey Smith said in an emailed statement.
Starboard successfully urged Darden shareholders to require the company to hold a special meeting to vote on the Red Lobster divestiture plan. It has accused Darden of delaying the meeting.
Darden on Friday said it would file a preliminary proxy statement later this month for the special meeting and to convene it "as promptly as practicable."
That comment did not mollify Starboard.
"It appears that Darden has instead sold Red Lobster in a rushed transaction at a severe discount," Smith said.
In a note titled "Who knew lobsters had middle fingers?", Janney Capital Markets analyst Mark Kalinowski said: "Clearly today's announcement is a thumb in the eye of activist investors."
Darden said it had explored several options to separate Red Lobster, but concluded that the Golden Gate deal maximized the value of the restaurants and real estate.
The restaurant operator expects net cash proceeds of about $1.6 billion from the sale. It plans to use about $1 billion of that to retire debt and the remainder to buy back up to $700 million in stock in fiscal 2015.
Red Lobster accounted for about 31 percent of Darden's total revenue in 2013. Its sales at established restaurants have fallen in five of the last six quarters.
Another activist investor, Barington Capital Group LP had pressed Darden to put its more-mature Red Lobster and Olive Garden chains into one company and its higher-growth restaurants, including LongHorn Steakhouse and Capital Grille, into another.
Barington, which represents a group of shareholders that hold more than 2 percent of Darden, was not immediately available for comment.
Real estate investment trust American Realty Capital Properties Inc
Goldman Sachs & Co
Deutsche Bank Securities Inc
Deutsche Bank Securities Inc, GE Capital
(Reporting by Maria Ajit Thomas and Shailaja Sharma in Bangalore and Lisa Baertlein in Los Angeles; Editing by Savio D'Souza and Lisa Von Ahn)