Darden activist ousts Olive Garden owner's full board

Fri Oct 10, 2014 4:19pm EDT
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By Christopher Boyd and Lisa Baertlein

ORLANDO/LOS ANGELES (Reuters) - Activist shareholder Starboard Value LP won its standoff with Darden Restaurants Inc (DRI.N: Quote), convincing shareholders to replace the entire board of the Olive Garden parent, a rare victory for dissident investors.

The election of Starboard's 12-director slate, announced Friday at Darden's annual meeting, was a feather in the cap for the New York hedge fund, Darden's second-largest investor with an 8.8 percent stake.

It was a stinging defeat for Darden, which this year alienated investors by brushing off their vote requesting a special meeting to debate the company's then-proposed sale of its struggling Red Lobster chain.

The "extraordinary" and "totally self-inflicted" loss for Darden comes as no surprise given Darden's "tone deafness" to investor wishes regarding the Red Lobster sale, said Charles Elson, director of the Weinberg Center for Corporate Governance in Delaware.

"It was kind of a done deal, wasn't it?" agreed Karl Sooder, a Darden investor and University of Central Florida marketing professor, who attended Darden's annual meeting in Orlando.

The board sweep, which is based on a preliminary vote count, is notable because of Darden's size, experts said. Darden is the largest U.S. operator of full-service restaurants with $8.55 billion in 2013 sales.

Some smaller U.S. companies have suffered similar fates recently.

For example, shareholders in ALCO Stores Inc ALCS.O in September replaced the full board at the retailer that serves small U.S. communities. Last year, investors replaced the whole board at Morgans Hotel Group Co. MHGC.O   Continued...

A man talks on his mobile phone in front of the Times Square Olive Garden in New York, June 23, 2010. REUTERS/Keith Bedford