The Board of Thai Union Group Public Company Limited (the “Company”) has announced its intention to pursue an exit from the minority investment in Red Lobster Master Holdings, L.P. (Red Lobster), an associated company held by Thai Union Investment North America LLC (TUINA), a subsidiary wholly owned by the Company in the United States of America.
According to a press release, Thai Union has been a strategic partner and minority investor in Red Lobster since 2016. Some of the reasons behind the decision to halt the investment are the COVID-19 pandemic, sustained industry headwinds, higher interest rates, and rising material and labor costs that have impacted Red Lobster's business resulting in prolonged negative financial contributions to the Company and its shareholders.
First, Thai Union initiated a review of Red Lobster to identify areas for operational and financial improvement. Consequently, the Board of Directors has determined that "Red Lobster’s ongoing financial requirements no longer align with our capital allocation priorities and therefore the Company is pursuing an exit of the minority investment."
In more detail, the Company will record a one-time approximate THB 18.5 billion (USD 530 million) non-cash impairment charge in the fourth quarter of 2023. Also, the company confirmed its financial statements "remain strong, and this one-time non-cash impairment will not cause any material adverse effect on the business operation, assets or financial conditions."
However, Thai Union stated that this transaction impacts the interest coverage ratio and dividend cap restriction which are covenants under a few tranches of bonds previously issued by the Company.
Finally, it will further seek covenant waivers from bondholders before the Company releases its earnings in February. It will continue to deliver improvements in profitability and gross profit margin across all core business categories.