Darden Restaurants Addresses Starboard's Claims Over Red Lobster Sale
ORLANDO, FL – After months of dealing with accusations from the hostile hedge fund Starboard Value, Darden Restaurants has issued a letter to shareholders to set the record straight regarding its recent Red Lobster sale. As AndNowUKnow covered in our previous article, Starboard has been among the most ardent critics of Darden's latest course of action, having recently gone so far as to file a lawsuit against them alleging that Darden has been 'hiding' records related to the Red Lobster sale. In its letter, Darden categorically denies these charges, putting all its cards on the table to show how all along it has been acting in the best interests of its shareholders.
Among the points laid out in the press release, Darden's Board states:
“Darden's Board determined that divesting Red Lobster was in the best interests of Darden and its shareholders. Despite numerous actions taken to improve the business, Red Lobster experienced years of declines in guest traffic, resulting in volatile and consistently weakening financial performance that significantly burdened Darden's results.”
“Contrary to Starboard's assertion that it was "rushed," the sale of Red Lobster was the culmination of a robust and deliberate process [which began in early 2013] designed to maximize value and minimize risks associated with continuing to own the business, including the brand's ongoing deterioration.”
“The Red Lobster sale better positions Darden for sustained growth, value creation and consistent return of cash to our shareholders in contrast to Starboard's erroneous claim of value destruction.”
“Although Starboard claims the business was sold at a "discount," the $2.1 billion purchase price represents a premium multiple compared to comparable restaurant deals and exceeded industry analysts' expected valuation ranges for the business, particularly taking into account Red Lobster's deteriorating performance.”
Investors have responded warmly to Darden's show of open communication, driving up the price of its stock 2.57% to $47.86 a share in the wake of the distribution of the press release. See the chart below to see how Darden's shares have been performing in the past five days.
For a company with many challenges to confront in the coming years as it looks to reestablish its Olive Garden brand with a younger generation, to see this kind of support coalescing around Darden is a welcome sight I am sure for its Board of Directors.
