Activist Investor Gains Control of Olive Garden Parent's Board
The revolution is upon us: Starboard Value has successfully replaced the entire board of Darden Restaurants.
Based on a preliminary vote, Darden shareholders have elected all 12 Starboard-nominated directors to Darden's board of directors, the company announced on Friday. As a result, two partners from the New York hedge fund and 10 other directors nominated by Starboard will now sit on the board.
"Darden has all the right ingredients to regain the strength and prominence it once enjoyed," newly elected Darden board member and Starboard CEO Jeffery Smith said in a statement. "The new Board is incredibly excited by the opportunity at hand."
Starboard, which is one of Darden's largest investors with an 8.8 percent stake in the company, and the Darden board have been at each other's throats for months. The biggest bone of contention has been Starboard's desire to split Olive Garden and LongHorn Steakhouse from Darden's smaller brands, as well as cutting what the investor believes to be unnecessary costs.
The battle began last year when the company announced plans to spin off or sell Red Lobster, while keeping Olive Garden, in December 2013. Darden denied activist investors Starboard and Barington Capital Group's request for a special meeting on the sale, which Starboard did not endorse. In May, shortly after Darden announced plans to sell Red Lobster to Golden Gate Capital, Starboard declared plans to unseat the entire board through a proxy contest, backed by Barington.
In the months since Starboard announced their plans for a takeover, Darden has attempted to appease the investor. The company announced in July that it would only nominate nine of its directors for election, leaving thee spots open for Starboard's nominees. Darden's CEO, Clarence Otis, also stepped down in July. However, Starboard remained unsatisfied with anything less than a complete coup.
In September, Starboard released a surprisingly snarky 294-page document on how to fix the company, with advice like Googling "Pasta 101" and nominations for all 12 positions on the board. Darden responded that it had already taken many of the actions proposed by Darden. However, in the eyes of shareholders, it was clearly not enough.