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March 26 Activist investor Barington Capital Group LP urged Darden Restaurants Inc to consider looking for a new chief executive, stepping up pressure on the restaurant operator to come up with ways to improve its performance.
The hedge fund and fellow activist investor Starboard Value LP have opposed Darden's plan to spin off or sell its struggling 705-restaurant Red Lobster chain.
"We are dismayed by (Darden CEO Clarence Otis's) efforts to separate Red Lobster and its valuable real estate from the company without shareholder approval," Barington said in a letter to Darden's independent directors on Wednesday.
Orlando-based Darden was not immediately available for comment.
Barington again urged Darden to reconsider its views on Red Lobster's real estate, saying it believed Darden should retain those assets and create a publicly traded real estate investment trust.
Barington represents a group of shareholders that hold more than 2 percent stake in the largest U.S. operator of full-service restaurants. Starboard has a stake of about 5.5 percent.
Barington had proposed in October that Darden split its businesses into two - one owning the more-mature Olive Garden and Red Lobster brands and another controlling its higher-growth chains including LongHorn Steakhouse and Capital Grille.
Barington said on Wednesday that Otis's background in finance made him more predisposed to running a restaurant conglomerate than managing individual chains.
The hedge fund urged the company's board to consider looking for a CEO with stronger restaurant experience.
Otis orchestrated Darden's acquisitions of LongHorn Steakhouse, Capital Grille, Eddie V's and Yard House after he became CEO in November 2004. He took on the additional role of chairman a year later.
Barington also reiterated that Darden should appoint an independent chairman to ensure that shareholder interests were protected.
Darden said on Friday that sales at established restaurants fell at both Red Lobster and Olive Garden chains in the third quarter ended Feb. 23.
The company's shares were little changed at $50.76 in late morning trading on the New York Stock Exchange. (Reporting by Devika Krishna Kumar in Bangalore; Editing by Kirti Pandey)