Earlier, we highlighted how Starboard Value affirmed the merits of non-binding resolutions, as they called for a shareholder vote on Darden's proposal to spin-off its Red Lobster unit (below). This has shaped up as one of the more interesting and contentious activist projects this year.
Things have definitely heated up. Note that two different investors have agitated for change:
Since our earlier correspondence, Barington penned a thoughtful letter letter enumerating a range of governance concerns, including the one that the media picked up, calling for a new CEO. Starboard also put together a thorough analysis for investors about Red Lobster (although not about the whole company), with a even more detailed real estate primer.
The immediate issue has become the Red Lobster spin-off, and the necessary special shareholder meeting. As we noted earlier, shareholders are kind of cornered, and have no choice but to call a special meeting. Darden intends to spin-off Red Lobster without a shareholder vote. So, Starboard has taken the lead to provide for one, seeking a special shareholder meeting for that purpose.
Darden could easily dispense with this hassle and expense, and hold off on restructuring until after the next annual meeting, presumably later this year. Or, if Darden is so confident in their plans for Red Lobster, they should seek shareholder approval for the deal. They show no sign of doing either.
All investors should follow this as an example of how management at even the largest US corporations blow off investors, and what we can do when that happens. Darden investors, of course, have more than a theoretical interest. Whatever they think of the Red Lobster spinoff, Darden shareholders must at least agree that a vote on that spinoff just makes sense.
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