(Updates to add Darden statement)
By Siddharth Cavale
April 22 Darden Restaurant Inc will have
to call a shareholder meeting to vote on Starboard Value LP's
proposal to delay the company's plan to spin off its struggling
Red Lobster chain, after the activist investor secured the
support of a majority of the company's shareholders.
Starboard has received written requests to call a special
meeting from shareholders representing about 55.5 percent of the
largest U.S. full-service restaurant operator's outstanding
shares, Starboard Chief Executive Officer Jeffrey Smith said in
a letter to the company.
Darden said in December that it planned to spin off or sell
the 705-restaurant Red Lobster seafood chain, and said at the
time that the transaction would not require a shareholder vote.
Starboard, which owns 5.5 percent of Darden, has urged
Darden to delay its plans to spin-off the chain saying it could
destroy as much as $800 million of shareholder value.
Starboard's Smith has asked the company to consider other
options to boost value, including slashing operating costs,
improving restaurant results and divesting real estate.
An independent inspector will review the requests for the
special meeting submitted by Starboard, Darden said in a
statement late on Tuesday.
Details about Starboard getting shareholder support were
first reported by CNBC, sending shares up 4 percent on the New
York Stock Exchange.
"The Red Lobster separation doesn't make a lot of sense,"
Smith said on CNBC's Squawk on the Street show on Tuesday.
"Shareholders are voicing their opinions very strongly that
they are not in favor."
Darden's plan followed a proposal from another investor,
Barington Capital Group, to split the company into two - one
with the mature Olive Garden and Red Lobster chains and the
other with brands such as LongHorn Steakhouse and Seasons 52.
Darden has so far resisted pressure to put the fate of the
floundering chain to a shareholder vote, saying other
alternatives, including those suggested by Starboard and others,
were not viable.
Darden reported in March that same restaurant sales at Red
Lobster tumbled 8.8 percent in the quarter ended Feb 23.
Customer visits at the chain fell in the double-digit
percentages in each month of the quarter, chalking up nine
straight months of falling traffic.
(Additional reporting by Aman Shah in Bangalore; Editing by
Savio D'Souza; Editing by Lisa Shumaker)