Friday, 21 October 2016
Last updated 15 hours ago
Jul 29 2014 | 9:24am ET
Having completed a deal that they so bitterly opposed, Darden Restaurants yesterday moved to mollify the hedge funds seeking to take control of the company.
Darden CEO Clarence Otis, the focus of some of the most virulent attacks by Starboard Value and Barington Capital Group, announced that he would step down as CEO by the end of the year. In addition, he will not stand for reelection to the board. Nor will two other current directors. Darden said it plans to nominate only nine director candidates for the 12-member board, ensuring that at least three of the candidates nominated by Starboard will be elected. In addition, the firm said lead independent director Charles Ledsinger would succeed Otis as chairman.
The shakeup comes on the day that Darden completed its $2.1 billion sale of Red Lobster to private-equity firm Golden Gate Capital. The hedge funds have decried that move, saying it destroyed at least $1 billion in shareholder value, and blasted the company for proceeding with the deal in the face of investor opposition.
Darden said it has held settlement talks with Starboard, which analysts expect to be victorious at the company’s annual meeting in September. But the hedge fund said Darden’s moves amount to “token board change” that “is not sufficient given the depth of value destruction and the abominable corporate governance that this board has overseen.”
“It is a shame for all Darden shareholders that this change happened only after the board sanctioned the destruction of a billion dollars in shareholder value by approving the Red Lobster sale against the vehement objections of its shareholders,” Starboard chief Jeffrey Smith said.
Starboard and Barington had pushed a much more radical break-up proposal for Darden that would have seen it split into three companies: one for Red Lobster and the Olive Garden, another for its faster-growing chains, and a third to manage its real estate.