Starboard Value has filed a Preliminary Solicitation Statement with the SEC seeking to call a Special Meeting of the company's shareholders. The statement was filed to provide shareholders with a forum for expressing their views on the proposed separation of Red Lobster, according to a press release.
Starboard, one of the largest shareholders of Darden Restaurants with ownership of approximately 5.5% of the outstanding common stock, recently delivered a letter to Darden Restaurants' Chairman and CEO, Clarence Otis as well as the company's Board of Directors expressing serious concerns about the company's future plans.
The hedge fund issued another letter to Darden shareholders today, which stated “…we have conducted extensive research on the Company and the casual dining industry, and we believe substantial opportunities exist to create value for all shareholders within the control of management and the board of directors of the Company (the "Board"). Unfortunately, instead of addressing the serious concerns and value creation opportunities outlined publicly by us and another large shareholder, the Company announced a poorly-conceived plan to separate Red Lobster (the "Red Lobster Separation").”
Starboard also noted that Darden should undertake a comprehensive review of all available operational, financial, and strategic alternatives to create value for shareholders before moving to complete a Red Lobster transaction.
Under the company's Bylaws as well as Florida law, the holders of 50% of the outstanding shares have the right to demand that Darden call a Special Meeting. If Starboard is successful in calling the Special Meeting, the company intends to solicit shareholder support to approve a non-binding resolution urging the Darden Board not to approve any agreement or proposed transaction involving a Red Lobster separation or spin-off prior to the 2014 Annual Meeting unless by shareholder approval.
The letter also stated, “Potentially even more concerning, management appears to be rushing the implementation of the Red Lobster Separation before shareholders would have the opportunity to express their views on this issue or elect Board members to better represent shareholder interests.”
As a first step, Starboard will be soliciting written requests to call the Special Meeting. In addition, Starboard is contonuing to conduct its own independent analysis of Darden's operations. “We plan to publicly comment in more detail in advance of the Special Meeting. Our analysis will include a detailed discussion of each of the value creation opportunities that we outlined in our public letters to the Company. In particular, we will highlight numerous operating improvements that we believe are necessary to turn around Darden's key restaurant concepts,” the letter states.
The letter came from Jeffrey C. Smith, Managing Member of Starboard Value LP.
Open Letter to Darden Shareholders
