UPDATE 1-Barington Capital calls for Darden breakup, real estate spinoff

Thu Oct 17, 2013 1:15pm EDT
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By Olivia Oran

Oct 17 (Reuters) - Darden Restaurants Inc, parent of the Olive Garden and Red Lobster chains, should break itself up and explore spinning off its real estate properties, activist investor Barington Capital Group said.

New York-based Barington, which is working with a group of investors that own more than 2 percent of the restaurant company, brought its ideas to Darden management, it said in a Sept. 23 letter posted on its website on Thursday.

Barington said it had met with members of Darden management in June.

Shares of Darden were up 0.7 percent at $51.01 in early- afternoon trading. The stock has fallen nearly 8 percent in the last 12 months as consumers have cut spending and amid competition from brands like Panera Bread Co and Chipotle Mexican Grill Inc.

The fund recommends that Darden split into two companies: One for its more mature Olive Garden and Red Lobster brands, and the other for its higher-growth chains including LongHorn Steakhouse, The Capital Grille, Yard House and Bahama Breeze.

Restaurant group Brinker International Inc used a similar strategy, divesting a number of brands over the last several years to focus on Maggiano's Little Italy and Chili's.

Barington also said Darden's land and buildings might be worth up to $4.4 billion if they were spun off into a publicly traded real estate investment trust, which would also reduce the company's tax burden.   Continued...