Activist hedge fund Starboard Value received shareholder approval to replace the entire Darden Restaurants board with 12 directors on Friday. The new directors include Starboard Chief Executive Jeffrey Smith, Olive Garden former president Bradley Blum, and a number of other industry leaders.
Darden Restaurants is the owner of Olive Garden and a number of other restaurant chains. It is the largest U.S. operator of full-service restaurants, has market capitalization of $6.42bn, and had 2013 sales of $8.55 bn. Activist investors, such as Starboard who has an 8.8 percent stake, have been pressing Darden on all aspects of its business – from spinning off restaurant brands to changing food recipes to replacing the board. This board swap is significant because of Darden’s size and leadership in its industry. The board replacement also marks a victory for activist investors – especially, after having a one year argument with Darden about creating a separate company for Olive Garden and Red Lobster. Contrary to shareholder demands, Darden sold Red Lobster in May for $2.1 billion. This move upset shareholders like Starboard, and led them to push for new leadership.
Darden is expected to go through many changes over the next few months. One major change is selecting a new chief executive officer. Starboard commented on this matter by saying that they will consider external and internal candidates for CEO. Former Darden board members suggest placing Eugene Lee, president and chief operating officer, as CEO. Other suggestions for Starboard include selling Darden’s real estate, franchising its restaurants, spinning-off higher end food chains, and improving its Olive Garden chain.
By: Jacob Kalatizadeh