Jeff Smith Sends Letter to Darden Restaurants, Inc. (DRI)’s CEO; Asks to Delay Red Lobster Spin-off

In a newly amended filing, Jeff Smith and his fund Starboard Value disclosed a letter sent to Darden Restaurants, Inc. (NYSE:DRI)‘s Chairman and CEO, Clarence Otis. In the letter, the investor explains his point of view regarding Darden’s plans to spin off its Red Lobster business.

Jeff Smith

Jeff Smith states in the letter that the separation of Red Lobster business will lead to the creation of a new public company with a single restaurant concept and therefore might underperform in comparison to Darden Restaurants, Inc. (NYSE:DRI), as well as other peers from the industry. Also, following the spin off, Darden will not be able to profit from its significant real estate assets. So, the separation of the business as planned currently will not create any value for the shareholders of Darden Restaurants, Inc. (NYSE:DRI).

In this way, Starboard considers that the management of Darden should delay the separation of Red Lobster and examine all the alternatives that will maximize the shareholder value. Among the alternatives proposed by the shareholder are the reduction of costs and improvement of operations that should be applied not just to the Red Lobster, but rather to the whole company. Darden Restaurants, Inc. (NYSE:DRI) should also evaluate all of its real estate holdings and consider their sale or spin off into a Real Estate Investment Trust. And finally, in order to benefit from other value creation initiatives, the company should consider launching some franchising concepts or some other domestic opportunities.

Jeff Smith also mentioned that he discussed earlier this month with Mr. Otis and is planning to have another meeting in January, where the parties will discuss the company’s underperformance and ways to increase the shareholder value.

The full text of Jeff Smith’s letter to Clarence Otis can be accessed through the link below:

Starboard Letter to Darden Restaurants

Starboard disclosed initiating an activist stake in the company in December. The position contains 7.25 million shares, which are equal to 5.6% of the company’s common stock. The fund already back then revealed that it has taken into account the poor financial performance of Darden Restaurants, Inc. (NYSE:DRI) and its plans regarding the spin-off of the Red Lobster.

Also last month, Darden Restaurants announced about its plans to separate the Red Lobster via a spin-off or a sale of the business.

Jeff Smith is a notorious activist investors that has taken positions in several companies. Of late, Starboard Value took another step in its plans regarding Wausau Paper Corp. (NYSE:WPP) and announced about nominating three directors to the company’s board.

Disclosure: none

Recommended Reading:

Hedge Fund Highlights: Nelson Peltz, Dan Loeb & Mario Gabelli

5 Stocks Hedge Funds Are Buying Right Now

Fisher Asset Management’s Top Picks From The Latest 13F: American Express Company (AXP), Amazon.com, Inc. (AMZN) & Others

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

The 10 Biggest Tax Havens in the World to Stash Your Money

The 15 Most Murderous Countries in the World

10 Largest Colleges in the World: Bigger Isn’t Always Better

Comedians in Cars Getting Coffee: The 6 Comedians Seinfeld Needs to Interview

Easy Money: The 10 Most Successful Investors in the World Today

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!