Jeffrey Smith and his fund Starboard Value, in its latest filing, revealed an open letter sent to the shareholders of Darden Restaurants Inc. (NYSE:DRI). The fund currently owns 7.25 million shares of Darden Restaurants Inc. (NYSE:DRI). The stake is equal to 5.5% of Darden’s outstanding shares.
In the letter, Starboard states that it has filed the preliminary solicitation statement in furtherance of seeking shareholder support to demand that Darden Restaurants Inc. (NYSE:DRI) call a special shareholders meeting in order to provide them with a democratic forum for expressing their views on the proposed separation or spin-off of the company’s Red Lobster business.
If a sufficient number of shareholders support Starboard’s efforts to call the special meeting, Starboard intends to solicit shareholder support in favor of a non-binding resolution urging the board of directors of Darden Restaurants Inc. (NYSE:DRI) not to approve any agreement or proposed transaction involving a separation or spin-off of the company’s Red Lobster business prior to the 2014 annual meeting of shareholders unless such agreement or transaction would require shareholder approval.
In December 2013, Darden Restaurants Inc. (NYSE:DRI) said that the Red Lobster separation will not require shareholder approval and that it expects to close the separation transaction in early fiscal 2015, which begins May 26, 2014.
According to Starboard, shareholders deserve a forum for expressing their views on the company’s proposed separation of Red Lobster.
“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. We believe the Red Lobster separation would not only be suboptimal, but may ultimately prove to be value destructive – potentially even worse for shareholders than the status quo,” Starboard states in the letter.
The full text of Starboard’s letter to shareholders of Darden Restaurants Inc. (NYSE:DRI) can be accessed through the link below:
Further, Starboard states that Darden Restaurants Inc. (NYSE:DRI) should undertake a comprehensive review of all available operational, financial, and strategic alternatives to create value for shareholders before hastening to complete a Red Lobster separation that may destroy substantial value.
Starboard notes that it is concerned that if Darden completes a spin-off or sale of Red Lobster without first fully and objectively evaluating all opportunities for the company’s owned real estate, then substantial shareholder value could be destroyed.
Last month, Starboard, in a filing, disclosed another letter sent to Darden Restaurants Inc. (NYSE:DRI)’s Chairman and CEO, Clarence Otis regarding the company’s plans to spin off its Red Lobster business. The fund went activist on Darden at the end of last year and since then it is pursuing the board into taking action to increase the stakeholder value.