Darden Restaurants Inc.’s entire board was ousted Friday morning when shareholders elected all 12 of activist investor Starboard Value L.P.’s nominees to the company’s board of directors, according to preliminary proxy results.
The Orlando, Fla.-based parent to Olive Garden, Longhorn Steakhouse and other casual-dining brands released the results after its annual shareholder meeting.
On behalf of Darden's new board, Starboard CEO Jeffrey C. Smith said in a statement, “Darden's future is bright.”
Starboard owns about 8.8 percent of Darden’s shares.
“The new board is prepared and excited to immediately begin working alongside Darden's management team to put Darden on track for long-term value creation for all shareholders,” Smith said.
Smith was elected to the board along with Betsy S. Atkins, Margaret Shan Atkins, Jean M. Birch, Bradley D. Blum, Peter A. Feld, James P. Fogarty, Cynthia T. Jamison, William H. Lenehan, Lionel L. Nowell, III, Charles M. Sonsteby and Alan N. Stillman.
“We look forward to continuing our hard work from inside the boardroom and working with management on a shared goal of excellence for Darden,” Smith said.
Smith said one of the board’s immediate priorities would be “the selection of a transformational leader to be Darden's CEO.”
Clarence Otis, Jr., Darden’s CEO since 2004, said in July he would step down by Dec. 31. At the time, the board appointed lead independent director Charles A. Ledsinger, Jr., as independent non-executive chairman.
In a statement Friday, Ledsinger expressed the outgoing board’s gratitude toward Darden’s management and employees.
“We give our best wishes to the incoming directors, welcome the reconstituted board and look forward to seeing continued progress at Darden,” he said.
Gene Lee, Darden’s president and chief operating officer, said management and employees were “grateful that there is clear resolution at the board level and very much look forward to working with our new board to continue to drive improvements throughout the organization."
In “Transforming Darden Restaurants,” a 294-page report released on Sept. 11, Starboard laid out a plan that its board members would take if elected, including making operational improvements, seeking a possible sale or spinoff of Darden’s real estate assets, possibly separating Olive Garden and the 465-unit Longhorn Steakhouse into a separate company, and designing a domestic and international franchising program for Darden’s brands.
Darden executives said in September the chain has made headway in improving operations at its 840-unit Olive Garden chain.
Starboard and another activist investor, Barington Capital Group L.P., had been pressing for changes at Darden since late last year, even before Darden said it would sell its 706-unit Red Lobster division. Golden Gate Capital acquired the brand for $2.1 billion in July, a deal that Starboard and Barington criticized for not being put before shareholders for a vote.
Citing items related to the Red Lobster sale, Darden for its Aug. 24-ended first quarter reported a loss of $19.3 million, or 14 cents per share, compared with a profit of $42.2 million, or 32 cents per share, in the same period last year. Excluding non-recurring special items, the company's earnings were 32 cents per share. Revenue was $1.6 billion, an increase from $1.5 billion a year ago.
Same-store sales in the quarter were mixed at Darden’s two largest brands, increasing 2.8 percent at LongHorn Steakhouse and declining 1.3 percent at Olive Garden. Among the company’s specialty restaurants, same-store sales dipped 0.3 percent at Seasons 52 but rose at its other concepts, increasing 2.3 percent at Yard House, 3.9 percent at Capital Grille, 1.1 percent at Bahama Breeze and 2.5 percent at Eddie V’s.
Darden operates 1,504 casual-dining restaurants.
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