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Last updated 1 day ago
Feb 11 2014 | 11:36am ET
One of the two activist hedge funds seeking to split Darden Restaurants is threatening a proxy fight to oust the company's board of directors.
Starboard Value has opposed Darden's plan to spin-off only its Red Lobster chain. The hedge fund said it fears that the company plans to move forward with the split before its annual meeting in September—and if it does, Starboard plans to make that annual meeting the current board's last.
"Should the board force through this ill-conceived and potentially value destructive plan while continuing to ignore the input of its major shareholders, it would clearly demonstrate that this board does not regard acting in the best interests of shareholders as its primary directive," Starboard Value's Jeffrey Smith wrote to Darden chairman and CEO Clarence Otis. "We are currently evaluating all options in furtherance of providing a means for shareholders to have their voices heard on the proposed Red Lobster separation prior to its completion. We are also prepared to take all steps necessary to hold the board accountable for its actions, including nominating a majority slate of director candidates and seeking the support of our fellow shareholders to replace a majority of the board at the 2014 Annual Meeting."
Darden unveiled its Red Lobster plan after another hedge fund, Barington Capital Group, called for splitting Darden into three companies: one for Red Lobster and the Olive Garden, one for its six faster-growing chains and one for its real-estate holdings. Starboard Value, which owns a 5.5% stake in Darden, backs that plan.