Every member of Darden Restaurants’ board of directors was replaced Friday in a move that could have a far-reaching impact on the company — from how many breadsticks are served at Olive Garden to who owns the land on which the restaurants sit.
At the company’s annual shareholders meeting in Orlando, Starboard Value CEO Jeffrey Smith won a vote to install himself and 11 other, hand-picked nominees as Darden directors. Starboard is a New York-based activist investor.
Soon after, the new board left for Darden’s nearby headquarters to meet with company management.
“An outcome like this has never happened before in the restaurant industry and maybe nowhere at a company this size,” said Mark Kalinowski, an analyst with Janney Capital Markets. “If you looked at things three months ago, you would be shocked that it had come to this.”
In an interview with the Orlando Sentinel, Smith said the new board will start working on Starboard’s plan, but he didn’t have a timeline on how fast changes would take place.
“We are going to make sure we do this right,” Smith said. “Right now our job as a new board is to help Darden.”
Darden operates more than 1,500 restaurants under Olive Garden, LongHorn Steakhouse and other brands. With annual revenues of $6.5 billion and nearly 150,000 employees, it is Orlando’s only Fortune 500 company.
The dramatic decision culminated months of pressure on Darden coming from Starboard and a second hedge fund bent on making changes at the world’s largest casual-dining company.
Starboard has been pushing Darden to cut costs by doing things such as revising Olive Garden soup recipes, serving fewer breadsticks and replacing carry-out containers. Those moves and others could save the company as much as $200 million annually, according to Starboard’s estimates, and drive the price of the stock up to $80 a share from the current $50.
Activist investor attacks began a year ago when Barington Capital initially asked the company to spin off its smaller restaurant chains. Starboard got involved in December 2013, eventually buying 8.8 percent of the company.
Sales at Olive Garden and Red Lobster had been in steady decline and were being outperformed by others in the casual dining industry.
Darden’s leadership angered investors when it ignored a shareholder request to hold a meeting on the company’s plans to sell off Red Lobster. Darden eventually sold Red Lobster for $2.1 billion to Golden Gate Capital in July.
Darden CEO Clarence Otis announced his retirement from the company shortly after the sale.
The new board now has power to select the new leadership, starting with a new CEO. Smith said he didn’t foresee any specific changes in Olive Garden management but wouldn’t comment on Otis’ role with the company. Otis has said he plans to leave later this year.
Otis was not at the shareholder meeting and only chairman Charles Ledsinger represented Darden’s outgoing board of directors.
The newly elected slate of directors have been working with Darden management “for a short period of time,” Smith said.
Smith said the company has not chosen an interim leader yet. Brad Blum, a former Olive Garden president and one-time candidate for Darden CEO, is among the 12 new board members. Some analysts have suggested Blum might be a potential candidate for CEO.
Starboard’s plan released in September also calls for Darden to sell or spin off its five smaller brands including Yard House, Bahama Breeze, Season’s 52 and Eddie V’s — a portfolio of restaurants acquired under Otis’ leadership.
Starboard also hopes to sell the property and buildings that house Olive Garden and LongHorn Steakhouses, with the goal of unlocking billions of dollars in returns for investors.
The vote shows how much a leadership change was needed at Darden, said restaurant investment analyst Lynne Collier with Sterne Agee.
“”I do think this new board will provide a greater catalyst for change,” Collier said. “A lot of the changes Starboard has proposed are reasonable and could easily be implemented.”
The newly elected board cannot take any official action until the vote is certified, which will come within the next four days, Darden spokesman Rich Jeffers said.
karnold@tribune.com or 407-420-5664
![National Weather Service experts warned Wednesday that the rise of a potent, global climate bully has set the stage for violent weather and killer tornadoes in Central Florida from now until spring. With one occurring every few to seven years at varying strengths, an El Niño climate phase is taking shape as among the stronger on record and is forecast to have a high probability of ushering powerful storm systems across the Gulf of Mexico into the Orlando region and other parts of Florida through March. National Weather Service officials said conditions in place put Central Florida at a comparable […]](https://www.orlandosentinel.com/wp-content/uploads/2023/11/FLORIDA-TORNADOES.jpg?w=534 "National Weather Service experts warned Wednesday that the rise of a potent, global climate bully has set the stage for violent weather and killer tornadoes in Central Florida from now until spring. With one occurring every few to seven years at varying strengths, an El Niño climate phase is taking shape as among the stronger on record and is forecast to have a high probability of ushering powerful storm systems across the Gulf of Mexico into the Orlando region and other parts of Florida through March. National Weather Service officials said conditions in place put Central Florida at a comparable […]")
