Darden Restaurants, Inc. (DRI): Starboard Value Walks the Talk, Goes On to Acquire Additional Shares of the Company

Not only has Jeffrey Smith’s Starboard Value LP managed to replace the entire board of Darden Restaurants, Inc. (NYSE:DRI), it has also strengthened its grip over the company. As a recent filing with the Securities and Exchange Commission (SEC) shows, Starboard Value has increased its stake in the company to over 11.6 million shares from the over 8.2 million shares that it previously owned. Starboard Value now owns over 8.7% of all common stock of Darden Restaurants, Inc. (NYSE:DRI) as an activist investor.

Darden Restaurants, Inc. (NYSE:DRI)

Smith founded Starboard Value Lp in 2002 as a spin-off from Ramus. It’s a fundamental focused hedge-fund that currently manages assets in excess of $2.4 billion. Starboard Value Lp is also making a name for itself in the Street as an aggressive activist investor, especially after Smith sent a letter to Yahoo! Inc. (NASDAQ:YHOO)’s CEO, Marissa Mayer, proposing different course of actions that the company could take to increase shareholder’s value including a merger with AOL, Inc. (NYSE:AOL). Whether Mr. Smith’s advice is being taken seriously by Yahoo! Inc. (NASDAQ:YHOO) like Darden Restaurants, Inc. (NYSE:DRI) took it, will only be known once the company comes out with its third quarter results on October 22.

Starboard Value Lp is also a major activist investor in MeadWestvaco Corp. (NYSE:MWV) and Office Depot Inc (NASDAQ:ODP), holding over 9.3 million shares and 46.2 million shares in the company respectively during the end of second quarter. Both companies have been range bound during the last year.

In its quest to improve shareholder value at Darden Restaurants, Inc. (NYSE:DRI), Starboard  had also published a 294-page manifesto last month against the menu of Olive Garden restraunt, a subsidiary of Darden Restaurants, Inc. (NYSE:DRI). Following the overhaul of the Board, Darden Restaurants, Inc. (NYSE:DRI)’s longtime CEO, Clarence Otis, was also replaced by an interim-CEO, Gene Lee, who has been serving as the COO of the company for almost a year. Moreover, In July this year Starboard Value also sued Darden Restaurants, Inc. (NYSE:DRI) over the sale of Red Lobster for $2.1 to Golden Gate Capital. In the lawsuit Starboard Value accused Darden Restaurants, Inc. (NYSE:DRI) of hiding records related to the sale and selling Red Lobster at a far lower cost than its market value.

Other prominent institutional investors that hold Darden Restaurants, Inc. (NYSE:DRI)’s shares include Israel Englander’s Millenium Management and Ken Griffin’s Citadel Investment Group. As of June 30, 2014, Millenium Management owns over 800,000 shares and shares Citadel Investment Group owns over 330,000 shares.  William M Lewis Jr., a director of Darden Restaurants, Inc. (NYSE:DRI) bought 11,000 shares of the company in November, last year. He currently owns over 50,000 shares.

 Disclosure: None