Darden board nominees cede more ground to activist investor Starboard
(Reuters) - Olive Garden owner Darden Restaurants Inc (DRI.N), in a concession to one of its largest shareholders, Starboard Value LP, on Tuesday announced a revised slate of director nominees that includes four new candidates, four incumbents and four open spots for Starboard picks.
Analysts were divided on whether the move would satisfy Starboard, an activist investor which for months has lobbied for major change at the underperforming company, and prevent it from seizing control of the entire 12-member board.
Orlando-based Darden earlier this summer nominated nine incumbent directors and left three spots open for Starboard candidates.
Charles Ledsinger Jr., Darden's non-executive chairman, said in a statement that the revised slate provides investors with both fresh perspectives and continuity.
"Starboard is seeking effective control of the company, representation which is disproportionate to Starboard's approximate 8.8 (percent) stake in Darden," said Ledsinger, who is not seeking re-election.
"This slate avoids many of the risks and destabilization that would result from full board turnover and giving control to a single shareholder's nominees," Ledsinger said.
KeyBanc Capital Markets analyst Christopher O'Cull said the move "will appease existing shareholders."
That view was not universal.
"We continue to believe the activists are likely to gain a majority of board seats, which if it happens, should be a meaningful catalyst for change," Janney Capital Markets analyst Mark Kalinowski said in a note to client.
Darden shares rose 0.9 percent to $47.73 in afternoon trading on the New York Stock Exchange.
Earlier on Tuesday, Darden released preliminary first-quarter earnings that topped internal expectations due to cost-cutting. Olive Garden accounts for roughly two-thirds of Darden's profit and same-store sales for that chain were down more than analysts expected.
Darden in July announced that Clarence Otis would step down as chief executive officer and chairman, amid pressure from Starboard and fellow activist investor Barington Capital Group LP.
Starboard last week reiterated its call for a full replacement of Darden's board and criticized the company for "unnecessarily delaying" its annual shareholder meeting to Oct. 10 from Sept. 30.
Starboard, Barington and other investors were particularly frustrated by Darden's rebuff of a recent shareholder vote calling for a special meeting to debate the merits of Darden's then-pending $2.1 billion sale of Red Lobster.
Starboard's nominees include Starboard CEO Jeffrey Smith and Brad Blum, who is credited with reviving Darden's flagship Olive Garden chain during his stint as president of that brand from 1994 to 2002. Representatives from Starboard were not immediately available for comment.
(Reporting by Lisa Baertlein in Los Angeles; Editing by Leslie Adler and Paul Simao)