Starboard Value Calls Red Lobster Sale ‘Egregious Violation Of Shareholder Trust’

Jul 16 2014 | 11:50am ET

Just weeks away from the consummation of a deal it has decried, hedge fund Starboard Value is reminding Darden Restaurants that it hasn’t forgotten.

Darden is set to close a $2.1 billion sale of its Red Lobster chain to private-equity firm Golden Gate Capital later this month. Starboard and Barington Capital Group have blasted the move, arguing that it will cost investors some $1 billion in shareholder value, and hammering Darden for moving forward without an investor vote in spite of their having won enough investor support for a special meeting for such a poll.

In a letter to Darden’s board yesterday, Starboard’s Jeffery Smith called the sale one of the “most egregious violations of shareholder trust we have ever seen.” And Smith said that the hedge fund had boosted its stake in Darden to 7.1%, boosting its effort to oust the company’s entire board at its Sept. 30 annual meeting.

Smith said that Darden was characterized by “a corporate bureaucracy that has demonstrated extremely poor leadership, egregious entrenchment, excessive corporate spending, and a complete lack of focus on serving the most important Darden constituents—the customers who visit Darden restaurants every day.”

“It has been clear to us for some time that something is horribly wrong at Darden.”

Starboard and Darden have called for a much more radical break-up of Darden, including the spin-off of its real-estate holdings.


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