Barington Asks Darden To Replace CEO

Barington Asks Darden To Replace CEO
By . The original uploader was Kalel2007 at English Wikipedia (Source: Extracted from a PDF file by Kalel2007) [Public domain], via Wikimedia Commons

Barington Capital Group LP Wednesday said it has lost confidence in Darden Restaurants, Inc. (NYSE:DRI)’s chief executive officer Clarence Otis.

In its letter released today, New York-based Barington said Darden Restaurants, Inc. (NYSE:DRI) would be worth ‘substantially more’ if the CEO were more effective.

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Barington sought Darden to split

Last year, activist investor Barington Capital urged Darden Restaurants, Inc. (NYSE:DRI) to split into two separate companies. It was reported that the investor group pushed Darden to create one company with its Olive Garden and Red Lobster restaurants and another with its higher-growth chains that include Capital Grille.

In December, Darden announced that it would spin off its Red Lobster chain in a move to see more from Darden’s stock value. In addition to the Red Lobster spinoff, Darden announced that it would slow or halt its expansion of its Olive Garden restaurants while slowing the acquisition of new properties for the LongHom Steakhouse chain.

Darden’s move doesn’t go far enough

Last month, Starboard Value LP, the activist investor headed by Jeffrey Smith, sent a letter to the leadership of Darden Restaurants, Inc. reiterating its position that the current plan of restaurant operator to spin off or sell Red Lobster is not in the best interest of shareholders and it could potentially destroy substantial value.

Earlier this month, Darden Restaurants, Inc. (NYSE:DRI) said it is continuing its push to spin off or sell Red Lobster and the process was already ‘well under way’. Darden’s results have been dragged down due to poor performance by Red Lobster and Olive Garden, the company’s biggest casual-dining chain by revenue.

Barington Capital Group LP recently owned over 2% of Darden.

Barington’s letter released today is intended to turn up the heat at Darden Restaurants, Inc. (NYSE:DRI). Both Barington and Starboard Value have been agitating for drastic moves, including breaking apart the company’s brands that they contend will bolster returns for investors.

However, Darden’s turnaround plan including the spinoff of its Red Lobster chain, doesn’t go far enough with Starboard and Barington. The hedge fund Starboard is now seeking a special shareholder meeting on the proposal. Barington is urging Darden’s board to consider replacing Mr. Otis with someone more experienced in the restaurant industry.

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Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports
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