Starboard Value LP (together with its
affiliates, "Starboard"), one of the largest shareholders of Darden
Restaurants, Inc. ("Darden" or the "Company") 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.
Best Regards,
Jeffrey C. Smith
Managing Member
Starboard Value LP
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