If Darden Restaurant’s board of directors hoped that its sale of Red Lobster would pay immediate dividends and convince investors not to throw them out next month, it is likely to be disappointed.
The company, which is engaged in a bruising proxy battle with hedge funds Starboard Value and Barington Capital Group, announced predicted first-quarter earnings that missed Wall Street estimates. Analysts had expected 47 cents per share; Darden says it will be between 28 cents and 30 cents.
Darden last month sold Red Lobster to private-equity firm Golden Gate Capital, over the bitter protests of the hedge funds, which say the deal destroyed at least $1 billion in shareholder value. The sale occurred in spite of apparently strong opposition from rank-and-file shareholders, who appeared prepared to back a special meeting to vote on the deal.
Starboard and Barington are seeking the replacement of Darden’s entire board at next month’s annual meeting. Analysts expect that the hedge funds’ slate will be victorious.