Barington Would Slice And Dice Darden Restaurants

Dec 18 2013 | 1:19pm ET

Barington Capital Group is turning up the heat on Darden Restaurants just ahead of that company's quarterly earnings announcement.

New York-based Barington yesterday issued its most detailed argument in favor of splitting the restaurant-chain owner, in an 85-page presentation. The hedge fund wants Darden split into three companies: one for its faster-growing franchises, one for its lower-performing brands and one for its real-estate holdings.

The first company would include Darden's six smaller chains—Bahama Breeze, Capital Grille, Eddie V's Prime Seafood, LongHorn Steakhouse, Seasons 52 and Yard House—and would be a growth stock. The second company would hold Olive Garden and Red Lobster and would focus on paying dividends.

The third prong would be a real-estate spin-off, in which Darden would create a real-estate investment trust. Darden owns the land under about 1,000 of its restaurants and the buildings on about 800 leased sites; Barington says that a spin-off or sale and lease-back would better reflect their value, which the hedge fund estimates at $4 billion.

Lastly, Barington wants to see Darden double or triple its cost-cutting efforts, pushing for savings of between $100 million and $150 million.

"We believe that Darden's corporate centralization has gone from providing well-intentioned shared services to being a stifling burden on the chain-level managers that is hindering the company's ability to compete with its more focused and nimble competitors," Barington wrote.


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