* Darden nominating 9 of 12 directors
* Starboard seeks major change with slate of 12 directors
* Election at Sept. 30 annual meeting
* Directors vulnerable but full board turnover unlikely
By Lisa Baertlein
Aug 12 (Reuters) - Darden Restaurants Inc's board looks vulnerable to a key activist shareholder's push for a shakeup that could pave the way for broader changes at the underperforming owner of Olive Garden and LongHorn Steakhouse.
Although the company recently conceded three board seats to Starboard Value LP, a few more of the remaining nine members could be voted out at Darden's Sept. 30 annual meeting if a settlement is not reached before that time, a half dozen analysts said.
Starboard and other investors remain particularly frustrated by the company's rebuff of a recent shareholder vote calling for a special meeting to debate the merits of Darden's then-pending sale of Red Lobster.
"It looks pretty good at this point for the dissidents," Charles Elson, director of the Weinberg Center for Corporate Governance in Newark, Delaware, said of the brewing proxy contest at Darden.
Darden's decision to leave three open board spots for Starboard suggests the company believed the activist had a reasonable chance of success, Elson said.
Darden said in a statement that distractions and costs associated with Starboard's proxy contest are not in the best interests of the company or its shareholders. The Orlando, Florida-based company added that it has attempted on numerous occasions to reach an agreement with Starboard and that it remains "ready to engage" with the activist to resolve the proxy contest.
Replacing the entire Darden board "could be significantly destabilizing to the company, disruptive to the progress being made at Olive Garden and Darden's other brands" and put its $2.20 per share annual dividend in jeopardy, the company said.
Starboard, one of Darden's biggest investors with an 8.8 percent stake, in May launched its bid to replace all of Darden's directors. Its nominees include 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.
Darden shares are down 4.9 percent over the past year compared with a 15 percent gain in the Standard & Poor's index over the same period.
Starboard and fellow activist Barington Capital Group LP are pushing for Darden to sell its real estate and split its mature chains such as Olive Garden from its newer, more vibrant brands like Yard House. They say those moves would boost shareholder returns.
Starboard did not immediately respond to requests for comment.
Darden announced on July 28 that Clarence Otis, its embattled chief executive and chairman, would step down as CEO at year end. He immediately resigned as chairman and is not running for re-election to the board.
The company also separated the chairman and CEO roles and said it would clear the way for a trio of Starboard's directors to be elected at its annual meeting.
That announcement came the same day that Darden closed its $2.1 billion sale of Red Lobster, a deal opposed by both Starboard and Barington.
Starboard CEO Jeffrey Smith responded in a statement, saying Darden's changes did not go far enough. He called for "a majority change to the board as soon as possible to jumpstart and complete the process of recruiting a truly great leader."
While Starboard's stake in Darden is not enough to achieve a coup d'etat of the board, Scott DeRue, professor of management, at University of Michigan's Ross School of Business in Ann Arbor, said it is easy to imagine that Starboard could win six or seven seats.
"I have a hard time seeing it with 12. But you only need seven" for a majority, DeRue said. (Reporting by Lisa Baertlein in Los Angeles; additional reporting by Ross Kerber in Boston; Editing by Richard Chang)