(Add statement from Darden in paragraphs 8-9)
SAN FRANCISCO, April 12 A group of shareholders
has sued Darden Restaurants Inc, accusing the company of
changing corporate bylaws to try to block investors' right to
vote on a plan to sell or spin off its Red Lobster dining chain,
the Wall Street Journal reported on Saturday.
The lawsuit comes as activist investors step up the pressure
on Darden, which is struggling to reverse customer declines amid
a broader slump in the casual-dining industry.
Hedge fund and activist investor Starboard Value LP, which
owns roughly 5.5 percent of Darden, has urged the company to
reconsider its intention of unloading the struggling seafood
chain and called for a special shareholder vote on the matter.
Barington Capital Group LP, which represents a group of
shareholders that hold more than 2 percent stake, wants the
company to split itself in two, separating mature and struggling
chains such as Red Lobster and Olive Garden from faster-growth
Neither was involved in the lawsuit.
According to the Journal, the lawsuit, filed in Florida by
pension funds for the City of Birmingham, Alabama, seeks to
invalidate changes made last month to the company's bylaws.
The lawsuit claims that Darden now requires shareholders who
file proposals or nominate directors to disclose more
information about their intentions, and their discussions with
other shareholders. It can also now adjourn any shareholder
Darden said in a statement that the lawsuit has no merit and
the company will vigorously defend against it.
"The changes do not impair our shareholders' ability to call
a special meeting, nominate individuals for election to the
board or propose new business in accordance with our bylaws and
applicable law," Darden said. "These bylaw amendments are valid,
legal and in the best interest of Darden and the company's
Influential proxy advisors Institutional Shareholder
Services and Glass Lewis on Friday expressed support for
Starboard's request to convene a special meeting of shareholders
to vote on Darden's intention to spin off Red Lobster. Darden,
which canceled an analyst and investor meeting slated for March,
has said it prefers to have one-on-one discussions with
Darden, the largest U.S. operator of full-service
restaurants, is struggling to turn things around. Sales at
established restaurants tumbled 8.8 percent at Red Lobster and
5.4 percent at Olive Garden in the third quarter ended Feb. 23.
Red Lobster suffered double-digit percentage declines in
customer visits in each month of the latest quarter, chalking up
nine straight months of falling traffic.
(Reporting by San Francisco newsroom; editing by Gunna Dickson)