In Wake of Red Lobster Sale, Starboard Seeks Control of Darden Board

NEW YORK (The Deal) -- Activist investor Starboard Value on Thursday said it would launch a full-scale proxy contest in an attempt to take over the 12-person board of Darden Restaurants (DRI) after the company went ahead and made a deal to sell its Red Lobster chain to Golden Gate Capital for $2.1 billion.

Starboard said in a letter to shareholders obtained by The Deal that, despite the sale, it still had a plan to realize greater value from Darden's real estate.

The dissident has one big thing going in its favor if the proxy vote goes forward: in April, more than 57% of the company's outstanding shares were voted in favor of holding a special meeting to vote on Starboard's nonbinding proposal to have Darden consider delaying its planned Red Lobster sale.

But the company went ahead on May 16 with the Golden Gate deal, leaving Starboard with fewer options. Darden expects to close on the deal in the first quarter of its fiscal 2015 year ending Aug. 24, without a shareholder vote.

It was likely that Darden had no plans to hold the special shareholder meeting until after it was too late to unwind the Red Lobster sale, according to people familiar with the situation. As a result, Starboard decided to change tactics and launch a proxy contest, which it had previously threatened it would do.

Starboard and another activist fund, Barington Capital Group LP had been pushing for Darden to consider strategic alternatives, such as the divestiture of all the company's real estate including that owned by Red Lobster into a separately traded REIT. Despite the deal with Golden Gate, Starboard said it believes it can unlock shareholder value by seeking to "monetize" the company's remaining restaurant real estate assets.

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