Hedge fund Starboard Value LP has taken a 5.6 percent stake in Darden Restaurants Inc. and called for additional corporate restructuring steps from the casual-dining company — becoming the second activist investor to push for change at the Red Lobster and Olive Garden parent.
In filings with the Securities and Exchange Commission Monday, New York-based Starboard said Darden’s plan to sell or spin off Red Lobster into a separate company “falls significantly short of the actions required to maximize shareholder value.”
Starboard, which paid more than $367.3 million for its Darden stake, according to SEC filings, also said it saw opportunities in Darden’s real estate holdings.
Darden had no comment on the filing, and a spokesman said the company had not been contacted by Starboard.
Hedge fund Barington Capital Group LP, which owns more than 2 percent of Darden’s shares, has been pushing since September for a breakup of Orlando, Fla.-based Darden, the nation’s largest casual-dining company that also owns the LongHorn Steakhouse, Bahama Breeze, Capital Grille, Eddie V’s Seasons 52 and Yard House restaurants.
Sara H. Senatore, a securities analyst with Bernstein Research, said in a research note Monday, “Starboard’s plan for value creation appears substantially similar to one proposed by Barington Capital and which Darden's management has evaluated and rejected.”
She also noted that Starboard was successful in getting board seats at Office Depot but failed to block a Smithfield Foods buyout.
Senatore added that she saw no shift in Darden strategy, which the company announced last week would include: the sale or spin-off of the 705-unit Red Lobster, the suspension of new Olive Garden openings, the slowing of LongHorn Steakhouse expansion, an additional $10 million in administration savings — on top of $50 million targeted earlier — and a change in management compensation and incentives.
For the Nov. 24-ended second quarter, Darden reported a 41.1 percent decline in profit, to $19.6 million, or 15 cents a share, from $33.6 million, or 26 cents a share, in the same year-ago quarter. Revenue rose 4.6 percent to $2.05 billion from $1.96 billion.
Darden owns and operates 2,174 casual-dining restaurants, including the 705 Red Lobsters, 834 Olive Gardens, 445 LongHorn Steakhouses, 52 Capital Grilles, 48 Yard House restaurants, 36 Bahama Breezes, 35 Seasons 52 units and 13 Eddie V’s.