Thai Union buys USD 575 million stake in Red Lobster

Thai Union, primarily known for its large global tuna brands including Chicken of the Sea and John West, is getting into the restaurant business with its USD 575 million (EUR 516.3 million) investment in Red Lobster.

In turn, the investment will further the international reach of Red Lobster, which operates more than 700 restaurants in the United States, Canada and other countries. The massive seafood restaurant chain has been increasingly profitable since its acquisition by Golden Gate Capital from Darden in 2014.

“Thai Union’s investment is a testament to the great progress Red Lobster has made and the tremendous growth potential ahead,” said Josh Olshansky, managing director at Golden Gate Capital. “Red Lobster has fantastic momentum, as the company has increased profitability each year since Golden Gate’s acquisition and guest satisfaction is at an all-time high. We look forward to forging a closer relationship between Red Lobster and Thai Union and to accelerating Red Lobster’s growth.”

Golden Gate Capital will remain majority owner and retain operational control of Red Lobster. Thai Union will acquire a 25 percent of Red Lobster for USD 230 million (EUR 207 million) and buy USD 345 million (EUR 311 million) worth of preferred shares, which can be converted to common shares - and an additional 24 percent stake of the company - within 10 years, according to the Wall Street Journal.

Thai Union is the world’s largest producer of shelf-stable tuna products with annual sales exceeding THB 125 billion (US 3.5 billion, EUR 3.2 billion). In addition to leading tuna brands, Thai Union is a global supplier of lobster, shrimp, sardines, mackerel, tuna, salmon, crab and other seafood.

Thai Union has been doubling its efforts on human rights and seafood sustainability since last year’s Associated Press investigation found forced labor at Thai Union facilities in Thailand. Red Lobster has also made efforts on the sustainability front, with its involvement in a multitude of sustainable seafood efforts, including being a founder of the Global Aquaculture Alliance (GAA) and protecting lobster populations.

“This investment marks a strategic step to build Thai Union’s direct-to-consumer channel, and will enable us to benefit from the extensive restaurant industry expertise of both the Red Lobster management team and Golden Gate,” said Thiraphong Chansiri, CEO of Thai Union Group. “We have worked closely with Red Lobster for over two decades and are highly supportive of the strategy Red Lobster has implemented under Golden Gate’s ownership.”

Red Lobster is expected to further expand its international presence with the investment. The restaurant chain has already added 21 international locations since Golden Gate Capital took over the company and “plans to continue to expand abroad,” according to a source familiar with the investment.

However, at least one restaurant industry analyst believes the multimillion dollar investment doesn’t have anything to do with helping Red Lobster expand beyond U.S. borders.

“It likely has far less to do with opening up more new restaurants and more to do with a play by Golden Gate for a future exit and locking in a strategic partner,” Aaron D. Allen, owner of consultancy firm Aaron Allen & Associates, told SeafoodSource.

Still, Red Lobster will realize increased efficiencies by utilizing Thai Union’s supply chain. Thai Union operates “world-class facilities in 12 countries that provide sourcing, production and distribution networks worldwide,” according to a statement from the company.

“Thai Union is one of the largest and best-managed global seafood companies, and has been a trusted strategic supplier to Red Lobster for over 20 years,” said Kim Lopdrup, CEO of Red Lobster. “This close partnership will help accelerate Red Lobster’s strategy of being the best seafood specialist in every trade area we serve, bringing guests ‘sea-to-table’ quality seafood and a best-in-class dining experience at affordable prices.”