Darden Restaurants, Inc. (NYSE:DRI) named Gene Lee, who was earlier president and chief operating officer, as interim chief executive officer. The announcement comes barely a week after Starboard Value LP won its standoff with the company.
Darden shareholders recently decided to elect all of Starboard’s nominees to its board.
Starboard wins control of Darden’s board
As reported last week, Darden Restaurants, Inc. (NYSE:DRI) unveiled the preliminary results of shareholder vote on whether to replace all of its board members. The victory went to activist-investor Starboard Value, as shareholders apparently took the advice of Glass Lewis and Institutional Shareholder Services. Last week’s proxy vote brought in all 12 of Starboard’s board nominees: Betsy S. Atkins, Margaret Shân Atkins, Jean M. Birch, Bradley D. Blum, Peter A. Feld, James P. Fogarty, Cynthia T. Jamison, William H. Lenehan, Lionel L. Nowell, III, Jeffrey C. Smith, Charles M. Sonsteby, and Alan N. Stillman.
Expert Chris Davis of Kleinberg Kaplan told ValueWalk in an interview that the activist hedge fund’s campaign against Darden Restaurants, Inc. (NYSE:DRI) was unusual as the firm seeks to replace the entire board.
Darden under pressure
Starboard Value had been pressuring Darden Restaurant to shake up its management team for the last year. In its statement Tuesday, Darden announced that CEO Clarence Otis, who has come under fire from activist investors for his unsuccessful turnaround strategy, is stepping down.
With an 8.8% stake, Starboard Value is Darden’s second-largest investor. Darden said Tuesday its new board of directors has also appointed Starboard’s CEO, Jeffrey Smith, as independent non-executive chairman. Smith will also lead the search for Darden’s new CEO, which will include both internal and external candidates. Smith has earlier led a similar search for office products retailer Office Depot Inc. (NYSE:ODP), and is currently a board member at data protection provider Quantum Corp.
In April, Darden Restaurants, Inc. (NYSE:DRI)’s move to separate its Red Lobster chain came under criticism as Starboard believed it would deprive the parent company of almost half of its real estate. The activist investor also expressed intention to discuss the composition of the board of restaurant chain citing its “dismal historical performance”. Starboard emphasized that major changes in the board composition were necessary to return the restaurant chain to profitability.