Darden Restaurants Inc. (DRI) was asked by activist investor Barington Capital Group LP to consider replacing Chief Executive Officer Clarence Otis, saying that the company has underperformed during his tenure and that his restructuring plan may destroy value.
Darden would be worth “substantially more” if Otis were a more effective CEO, New York-based Barington said today in a letter. Barington, which has been privately pushing for changes at Darden since June, represents a group of investors that owns more than 2 percent of the shares.
Otis, who became CEO in 2004 and chairman in 2005, is working to separate Darden’s Red Lobster seafood chain through a tax-free spinoff or sale while also halting acquisitions and cutting expenses amid slowing sales momentum. Activist investor Starboard Value LP has joined Barington in opposing the move and seeking other changes.
“Our focus is on doing what is in the best interest of all Darden shareholders and the board is confident in the actions the company is taking to deliver on this responsibility,” Rich Jeffers, a spokesman for Darden, said in an e-mailed statement. “We have been speaking directly with our shareholders and look forward to continuing that dialogue.”
Darden rose 0.2 percent to $50.81 at the close in New York. Shares of the Orlando, Florida-based company have declined 6.5 percent this year, compared with a 2.3 percent drop for the Standard & Poor’s 500 Restaurants Index.
Same-store sales fell 5.4 percent at Olive Garden and 8.8 percent at Red Lobster, Darden’s two biggest chains, in the three months ended Feb. 23, the company said last week in a statement. Harsh winter weather hurt results, Darden said.
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