Starboard Value L.P., an investment firm that owns approximately 5.5% of Darden Restaurants, Inc. stock, is urging other shareholders to resist the company’s efforts to spin off its Red Lobster banner. Starboard Value said the move will erode shareholder value and is calling for a special meeting of shareholders so it may present its concerns and possibly bring about change.
“Starboard believes the Red Lobster separation is the wrong spin-off, at the wrong time, and for the wrong reasons, and that the special meeting is necessary because Darden appears intent on completing the Red Lobster separation prior to the 2014 annual meeting of shareholders, when all directors are up for election,” the investor group said in a statement.
Specifically, Starboard said Darden is attempting to spin off Red Lobster when store traffic, same-store sales and margins are the worst they have been in years. The group also noted Darden does not need to spin off the platform in order to make changes.
“We have serious concerns as to management’s true motives behind the Red Lobster separation, and we question whether their interests are aligned with shareholders,” Starboard Value said in a filing with the U.S. Securities and Exchange Commission. “A Red Lobster separation is irreversible and value could be permanently impaired – a shareholder discussion must occur before any sale or spin-off of Red Lobster.”
If Starboard’s request for a special meeting is approved, the investor group said it would seek to approve a non-binding resolution urging the board not to approve any agreement or proposed transaction involving a separation or spin-off of the Red Lobster business prior to the 2014 annual meeting unless such agreement or transaction would require shareholder approval.
In mid-December, Darden Restaurants announced it planned to spin off the Red Lobster business. Since then several shareholder groups have urged the company to reconsider its options.
