By Olivia Oran
Nov 21 Activist investor Barington Capital Group
accelerated its push for change at restaurant chain and Olive
Garden parent Darden Restaurants Inc on Thursday.
Barington, which leads a shareholders' group that owns a
stake of more than 2 percent in the chain, said it hired
investment bank Houlihan Lokey to conduct an independent review
of recommendations to improve Darden's financial performance.
New York-based Barington has urged Darden management to
break the company up and explore spinning off its real estate
properties. The company, which manages eight restaurant brands,
has become too large and complex to compete effectively with its
rivals, Barington said.
Barington recommends that Darden split into two companies
-one for Olive Garden and Red Lobster, and the other for its
higher-growth brands, including LongHorn Steakhouse, The Capital
Grille, Yard House and Bahama Breeze.
Barington also recommends that Darden explore creating a
publicly traded real estate investment trust. Barington does not
believe that the value of Darden's real estate assets, which
includes 1,048 owned restaurants and the buildings on 802 ground
lease sites, is adequately reflected in the company's stock
Darden's earnings have suffered recently as U.S. consumers
have cut spending and competition has increased from brands like
Panera Bread Co and Chipotle Mexican Grill Inc.
In the first quarter ended Aug. 25, net income fell 37
percent to $70.2 million, or 53 cents per share. Darden has said
it will cut operating costs by $50 million per year, starting in
Barington, which has also recommended that Darden cut costs
by $100 million to $150 million, praised the company for
beginning to reduce expenses.
"While we were encouraged by Darden's recent announcement
that it is taking steps to reduce expenses by approximately $50
million a year - a helpful start toward addressing the cost
reductions we recommended - we believe there is much more work
that needs to be done and in a far more expeditious timeframe,"
Barington President James Mitarotonda said in the release.
Barington said that it will share Houlihan Lokey's review of
its recommendations once it is complete.
In response, Darden said in a statement it welcomed input
"toward the goal of enhancing shareholder value."
"While it is the Company's policy not to comment on specific
discussions with shareholders, the Company has had dialogue with
Barington Capital, and the Board will take the time necessary to
thoroughly evaluate Barington's suggestions, just as the Company
does for any of its shareholders," Darden said.
Barington said it is also working with proxy solicitation
firm MacKenzie Partners.