Darden Sued by Florida Teamsters Union Over Red Lobster Sale
ORLANDO, FL - The controversy surrounding Darden Restaurant's Board of Directors continues with a lawsuit by the Teamsters Local 443 Health Services & Insurance Plan of Connecticut. According to Business Insider, the lawsuit claims that the Board misled shareholders during the sale of Red Lobster, painting a far more dire picture of the chain than was supported by the facts.
"The Board had very different, self-interested incentives when it downplayed Red Lobster's performance to Darden's shareholders," the lawsuit read, according to CNBC. "The Board knew at all relevant times that it was selling Red Lobster at an artificially low price to protect the Board members' directorships."
As proof of these claims, the Teamsters cite a confidential debt offering document obtained by CNBC which stated, “The management team believes that each of these issues are temporary in nature, correctable, and that they have plans in place to return the business to historic levels of profitability."
"The Board sought to justify the rushed sale of Red Lobster by telling stockholders that the restaurant chain's recent poor performance was due to intractable structural problems that would inevitably result in worsening performance in the coming quarters and years," the suit argues. "The Board knew that Red Lobster's debt offering documents, functioning as a loan application, would be subject to rigorous scrutiny and due diligence by potential lenders."
This matter is complicated by the ongoing feud between Darden's Board of Directors and one of the company's major stakeholders, Starboard Value LP. Arguing that the current Board is ill equipped to run Darden, Starboard has criticized everything from the Board's Red Lobster sale to Olive Garden's policy against putting salt in its pasta water.
Starboard, which owns an 8.8% stake in Darden Restaurants, according to the Wall Street Journal, has proposed its own set of nominees for Darden's Board. In recent news, the Proxy-advisory firm Glass Lewis & Co has joined Starboard in calling on shareholders to vote in these new directors, who include industry veterans and executives from Burger King, Romano's Macaroni Grill, and even Brad Blum, Olive Garden's former President.
Darden has so far resisted these proposed changes, stating, "We believe these decisions are best made by an independent board that is comprised of directors who represent the interests of all Darden shareholders, not just Starboard's interests.”
With so much controversy swirling around Darden, what will happen in the future remains an open question. Stay tuned to AndNowUKnow for the latest updates on Darden Restaurants.
