Thai Union Group is engaging with potential buyers for its minority stake in Red Lobster, the company said in a financial filing on Thursday.
The seafood company expects to divest from Red Lobster by the end of 2024. Thai Union purchased a 25% stake, and the option for another 24% through the conversion of preferred shares, in Red Lobster for $575 million in 2016.
Despite previous efforts to turn around Red Lobster, which included a review of pricing and promotional activity, Thai Union determined in January that Red Lobster’s “ongoing financial requirements are no longer aligned with the Group’s capital allocation priorities.”
The impact of the COVID-19 pandemic, industry headwinds, high interest rates and growing labor and operational costs caused Red Lobster to exert sustained negative pressure on Thai Union’s finances.
It doesn’t look like Red Lobster will recover anytime soon. A recent report by Creditsafe revealed that the chain is having trouble paying its bills on time. On average, the chain is paying its bills later, according to Creditsafe. This could indicate the company lacks the cash flow to protect itself from potential losses, difficult market conditions and revenue declines.
Experts have said the chain may be considering bankruptcy. It already hired a restructuring expert with experience bringing beleaguered chains through Chapter 11 bankruptcy as its CEO.
