(Reuters) - Darden Restaurant Inc (DRI.N) has 60 days to call a shareholder meeting to vote on activist investor Starboard Value LP’s proposal to delay the company’s plan to spin off its struggling Red Lobster chain, CNBC reported.
The special meeting has to be called as Starboard got consent from 54 percent of the shareholders of the largest U.S. full service restaurant operator, CNBC said, citing sources familiar with the issue. (link.reuters.com/ruw68v)
Darden shares were up 3.2 percent at $49.76 in afternoon trading on the New York Stock Exchange, valuing the company at more than $6.5 billion.
The company said in December that it planned to spin off or sell the 705-restaurant Red Lobster seafood chain, and said at the time that the transaction would not require a shareholder vote.
Starboard, which owns 5.5 percent of Darden, has urged Darden to delay its plans to spin-off the chain saying it could destroy as much as $800 million of shareholder value.
Starboard’s Chief Executive Jeffrey Smith has asked the company to consider other options to boost value, including slashing operating costs, improving restaurant results and divesting real estate.
“The Red Lobster separation doesn’t make a lot of sense,” Smith said on CNBC’s Squawk on the Street show on Tuesday.
“Shareholders are voicing their opinions very strongly that they are not in favor.”
“We have not received notice from Starboard,” Darden said in an emailed statement on Tuesday.
Starboard was not immediately available for comment.
Darden’s plan followed a proposal from another investor Barington Capital Group to split the company into two - one with the mature Olive Garden and Red Lobster chains and the other with brands such as LongHorn Steakhouse and Seasons 52.
Darden has so far resisted pressure to put the fate of the floundering chain to a shareholder vote, saying other alternatives, including those suggested by Starboard and others, were not viable.
Darden reported in March that same restaurant sales at Red Lobster tumbled 8.8 percent in the quarter ended Feb 23.
Customer visits at the chain fell in the double-digit percentages in each month of the quarter, chalking up nine straight months of falling traffic.
Editing by Savio D'Souza