UPDATE: Starboard Says IVS Voting Has Confirmed Delivered Written Requests to Call Special Meeting from Holders of ~57% of Darden's Shares
Starboard Value LP (together with its affiliates, "Starboard"), one of the largest shareholders of Darden Restaurants, Inc. ("Darden" or the "Company") (NYSE: DRI), with ownership of approximately 5.5% of the outstanding common stock of the Company, today announced that the independent inspector of elections, IVS Associates, Inc., has issued a voting report confirming that Starboard delivered valid written requests to call a special meeting of shareholders of the Company (the "Special Meeting") from the holders of approximately 57% of the Company's outstanding shares. Starboard also announced today that it has filed preliminary proxy materials with the Securities and Exchange Commission in connection with its solicitation of proxies for the Special Meeting, at which Starboard will present a non-binding resolution urging Darden's Board of Directors (the "Board") not to approve any agreement or proposed transaction involving a Red Lobster separation or spin-off prior to the 2014 Annual Meeting of Shareholders unless such agreement or transaction would require shareholder approval.
Starboard also announced today that it has delivered a letter to the Board urging the Company to hold the Special Meeting immediately and without unnecessary delay.
The full text of the letter to the Board follows:
May 2, 2014
Darden Restaurants, Inc. 1000 Darden Center Drive Orlando, FL 32837 Attn: Board of Directors
Dear Board of Directors:
On April 22, 2014, Starboard Value LP ("Starboard") delivered written requests to Darden Restaurants, Inc. ("Darden" or the "Company") to call a special meeting of shareholders (the "Special Meeting") from the holders of more than 55% of the Company's outstanding shares. On April 25, 2014, Starboard delivered a supplement to its April 22^nd letter enclosing additional written requests Starboard received from Darden shareholders. Starboard has now delivered written requests to the Company from the holders of approximately 57% of Darden's outstanding shares, well in excess of the 50% required to call the Special Meeting. Further, on May 2, 2014, IVS released a preliminary certification report confirming that Starboard delivered valid written requests representing approximately 57% of the Company's shares outstanding.
When interpreting these results, it is important to understand that we believe that approximately 20% of the Company's outstanding shares are held by retail investors (who generally have extremely low vote totals) and, based on the short interest in the Company, approximately 10% of the outstanding shares are out on loan and therefore were not eligible to vote as of the record date. Therefore, given the limited number of shares realistically available to vote, our receipt of written requests from holders of approximately 57% of the Company's outstanding shares clearly demonstrates that the shareholders of Darden overwhelmingly support the calling of the Special Meeting.
As you know, we intend to present the following proposal at the Special Meeting:
to approve a non-binding resolution urging the Board of Directors of Darden (the "Board") not to approve any agreement or proposed transaction involving a Red Lobster separation or spin-off (the "Red Lobster Separation") prior to the 2014 Annual Meeting of Shareholders (the "2014 Annual Meeting") unless such agreement or transaction would require shareholder approval.
Shareholders have taken an important step by actively consenting to the calling of the Special Meeting. We have successfully worked within the tight confines of Darden's Charter and Bylaws, which set the threshold for calling a special meeting of shareholders at the maximum permitted under Florida law (50%, compared to the default Florida provision of 10%). This strong effort unequivocally demonstrates that shareholders demand the opportunity to attend a Special Meeting where their voices may be clearly heard regarding the irreversible and potentially value-destructive Red Lobster Separation before it is too late. We fully expect for the Board to uphold its legal responsibilities and fiduciary duties by promptly calling the Special Meeting.
We are extremely disappointed and highly concerned with Darden's response to date to our delivery of more than sufficient written requests to call the Special Meeting. Shareholders have clearly spoken. Why are you continuing to downplay the significance of this extraordinary action and thereby making it so difficult for shareholders to exercise their rights?
These are the shareholders whom you were elected to represent, and it is your responsibility to act in their best interests. The shareholders have clearly told you in submitting their written requests that the calling of the Special Meeting is critical for protecting their investment in Darden, and we expect you to schedule the Special Meeting without further delay. Your statement that the Company will "address the Special Meeting request as appropriate" is woefully inadequate and illustrative of your poor governance practices and dismissive approach towards your own shareholders.
We remind you that if the Company has not provided notice to shareholders of the Special Meeting by Tuesday, May 6, 2014 for a Special Meeting to be held within sixty (60) days of such date, then we will have no choice but to conclude that you do not have a good-faith intent to call the Special Meeting in a timely manner. Please schedule the Special Meeting post haste.
It is also critical that you recognize that you should not commit to any transaction for Red Lobster prior to the Special Meeting unless such transaction is subject to shareholder approval. We believe that for the Board to definitively commit the Company to any Red Lobster Separation transaction before giving shareholders the opportunity to express their opinions at the Special Meeting would be an egregious violation of good corporate governance, and would clearly signal that this Board does not regard its duties to shareholders as a priority.
We believe Darden's continued attempts to prevent and now delay the Special Meeting, a right afforded to all shareholders under Florida law, is a clear failure of corporate governance for which you must be held accountable. In light of these corporate governance concerns, coupled with Darden's dismal operating and stock price performance, we believe substantial change at Darden may be required, and are prepared, if necessary, to put forth a majority slate of directors for election at the 2014 Annual Meeting to ensure that shareholders of Darden have a Board that is both well equipped to oversee the Company's operations and strategy and open to listening to its shareholders.
Jeffrey C. Smith Managing Member Starboard Value LP
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