Starboard Value LP, managed by Jeffrey Smith, has revealed, in a newly amended filing with the U.S. Securities and Exchange Commission, a letter sent to the board of directors of Darden Restaurants Inc. (NYSE:DRI). In the letter, Starboard underlined the need for a new direction and new leadership at the company.
According to the new filing, Starboard holds 9.45 million shares of Darden Restaurants Inc. (NYSE:DRI), the stake is up from 8.20 million shares the fund held previously. The new position represents 7.1% of common stock outstanding.
In the letter, the investor condemned the board for the recent value destruction at Darden Restaurants Inc. (NYSE:DRI), including the loss of $1 billion in market value relative to the company’s peers since the sale of Red Lobster was announced, which could have easily been avoided had the board paused and listened to its shareholders.
Starboard states that the sale of Red Lobster is the latest in a string of bad decisions by management and the board that have led to the company’s massive stock price underperformance relative to its peers over the past five years. The fund urged the board to allow Starboard’s highly qualified slate of restaurant industry veterans, real estate experts, and corporate governance stewards to begin to take Darden Restaurants in a new and dramatically improved direction without unnecessary delay.
“It has been clear to us for some time that something is horribly wrong at Darden. There isn’t any one silver bullet that can now easily transform Darden. After suffering for many years under failed leadership, it is going to take much more than a new Olive Garden logo or minor adjustments to its compensation program to right the ship. Rather, we believe Darden needs to employ a collection of disciplined operational improvements and strategic actions from top to bottom in line with Bill Darden’s core values. With the right leadership in place, we can once again see an incredibly bright future for the Darden franchise,” Starboard states.
In February of this year, Starboard disclosed an open letter it sent to the shareholders of Darden Restaurants Inc. (NYSE:DRI). The fund stated in the letter that it 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. Earlier, the fund sent a letter to Darden Restaurants Inc. (NYSE:DRI) Chairman and CEO Clarence Otis regarding the company’s plans to spin off its Red Lobster business.
Aside from Starboard, Israel Englander’s Millennium Management owns 905,740 shares, and Ken Griffin’s Citadel Investment Group disclosed ownership of 276,467 shares of Darden Restaurants Inc. (NYSE:DRI).