Darden Restaurants Inc. is fighting off rumors that its Red Lobster chain is closing after the company announced it planned to sell or spin off the seafood eatery.
Rich Jeffers, Darden's director of media relations, told the
News-Herald in Southgate, Mich., that the company never said it was closing the restaurant and wants to reassure customers.
Jeffers told the newspaper that Red Lobster transaction would "simply be a change in ownership."
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Darden announced earlier this month, after pressure from a handful of investors, plans to sell its biggest asset in a move to improve stock prices,
according to The New York Times. The company plans to sell Red Lobster through a tax-free spinoff to shareholders, but would be interested in a sale.
Darden is one of the country's giants in casual dining industry, with a market value of $6.7 billion, according to the Times.
The Los Angeles Times reported that Red Lobster has 705 locations in the U.S. and Canada. Former Red Lobster executive Kim Lopdrup will return as its chief executive once it is sold or spun off.
Red Lobster's foot traffic compared with the same period in 2012, though, had fallen 7.3 percent last month, 9.9 percent in October and 5.8 percent in September.
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At the time that Darden announced it was selling Red Lobster, it also noted that it would stop opening new Olive Garden locations while scaling back growth in its LongHorn Steakhouse chain.
"Our industry is in a period of significant change, with relatively low levels of consumer demand in each of the past several years for restaurants generally, and for casual dining in particular," Clarence Otis, Darden's chief executive in a statement.
Fox Business reported that the hedge fund Barington, which owns more than 2 percent of Darden, led the charge for the company to part ways with Red Lobster.
Barington CEO James Mitarotonda called the Red Lobster move "a first step toward improving focus and operating execution." He told Fox Business that it the move "fails to address significant additional opportunities to enhance long-term shareholder value."
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