(Adds company statement on Otis' package, background)
By Lisa Baertlein
July 28 Darden Restaurants Inc said on
Monday that Clarence Otis would step down as chairman and chief
executive officer, buckling under pressure from activist
investors Barington Capital Group LP and Starboard Value LP.
Shares of Darden, which just closed the sale of its Red
Lobster chain and is working to boost business at its flagship
Olive Garden restaurants, jumped 5 percent in extended trading.
In further concessions, Orlando-based Darden said it would
separate the chairman and chief executive roles, and clear the
way for some of Starboard's proposed directors to be elected at
its annual meeting.
Barington Chairman and CEO James Mitarotonda, who had asked
Darden to split the chairman and CEO roles, said the changes
were not fast enough and did not go as far as needed, adding he
had lost confidence in Otis's ability to lead.
"While a leadership change at Darden and the appointment of
an independent chairman are positive steps that are long
overdue, we view the board's 11th hour gesture to concede three
board seats to Starboard as 'too little, too late'," Mitarotonda
said in a statement.
The change required could only be accomplished by the
election of a new slate of independent directors, he said.
Barington represents a group that holds more than 2 percent of
Starboard launched a fight to take over Darden's board in
May, saying the then-pending Red Lobster sale was a "destructive
transaction" that ignored the rights of shareholders.
Darden said on Monday its board expects to nominate nine
directors for the 12 available seats at the Sept. 30 shareholder
meeting. By doing so, Darden said it ensured that at least three
of the nominees proposed by Starboard would be elected.
Representatives from Starboard, which owns about 5.5 percent
of Darden's shares, were not immediately available for comment.
Howard Penney, a restaurant analyst at Hedgeye Risk
Management and a vocal critic of Darden's management, had a one
word reaction to the CEO's departure and the other news: "Amen!"
Otis, who has been charge for a decade, will remain CEO
until Dec. 31 or until a replacement is appointed.
Darden named independent lead director, Charles Ledsinger
Jr, as independent non-executive chairman, effective
Earlier on Monday, Darden said it finalized the $2.1 billion
sale of Red Lobster to Golden Gate Capital, a deal opposed by
both Starboard and Barington, who were pressing for more
comprehensive changes. Investor ire surged after Otis resisted
putting the sale to a shareholder vote.
A Darden spokesperson said Otis' departure was a "mutual
decision" between the CEO and the board, and had been under
discussion for some time. The exit package has not yet been
"With the Red Lobster sale complete and progress on our
Olive Garden brand renaissance and other strategic priorities
underway, this is the right time for me to step down," Otis said
in a statement.
Darden shares were up $2.23 to $47.15 in after-hours
(Reporting by Lisa Baertlein in Los Angeles and Devika Krishna
Kumar in Bangalore; Editing by David Gregorio, Grant McCool and