(Adds details on proxy fight, analyst comment)
By Shailaja Sharma and Lisa Baertlein
June 20 (Reuters) - Darden Restaurants Inc, battling an activist investor that wants to replace its entire board of directors, on Friday reported lackluster results at its flagship Olive Garden chain as it prepares to complete the sale of Red Lobster next month.
Starboard Value LP launched its effort to replace Darden's board shortly after the restaurant operator's May 16 announcement that it planned to sell Red Lobster to Golden Gate Capital for $2.1 billion.
Starboard, which sought a shareholder vote on the Red Lobster sale, called the deal a "destructive transaction" that ignored shareholder rights. It nominated a full 12-candidate slate for election at the company's annual meeting, scheduled for Sept. 30.
Starboard, backed by fellow activist investor Barington Capital Group, has said it had identified other ways to save costs, boost revenue and improve profits at Darden.
Starboard owns 6.2 percent of Darden, while Barington represents shareholders holding more than 2 percent.
Darden on Friday said the sale was on track to close in July and that it expects to receive $1.6 billion after tax and costs.
The Orlando-based company plans to bolster performance of the Olive Garden chain through remodels, menu additions, a new logo and advertising. Olive Garden is expected to account for almost 60 percent of Darden's sales after the sale of Red Lobster.(1.usa.gov/1ysgwtS)
To that end, Darden said it expects sales at established Olive Garden restaurants to be flat to up 1 percent for the year ending May 2015.
Olive Garden's same-restaurant sales have remained weak amid intense competition, and they fell a steeper-than-expected 3.5 percent for the fourth quarter ended May 25.
"Olive Garden continued to disappoint ... perpetuating ongoing concerns that the core business will need more meaningful changes in strategy if it hopes to regain its momentum," Bernstein Research analyst Sara Senatore said in a client note.
Darden's fourth-quarter net income fell 35 percent to $86.5 million, or 65 cents per share, during the quarter. Costs and charges tied to the pending Red Lobster sale reduced profit by 19 cents per share.
Miller Tabak analyst Stephen Anderson, in a client note, called Darden's latest quarter "messy." Still, he said, the post-Red Lobster company could have lower overall expenses, less exposure to volatile seafood prices, a stronger balance sheet and, for the first time in several years, positive free cash flow.
Darden, which also owns the LongHorn Steakhouse, Seasons 52 and Capital Grille chains, forecast full-year adjusted earnings of $2.22 to $2.30 per share, compared with the average analyst estimate of $2.79, according to Thomson Reuters I/B/E/S.
Shares of the largest operator of full-service restaurants in the United States were down 2.6 percent to $48.24 in midday trading. (Reporting by Lisa Baertlein in Los Angeles; Editing by Joyjeet Das and Gunna Dickson)