Seeking Alpha

Starboard opposes Darden's planned Red Lobster spin-off

  • Joining Barrington Group in its criticism of Darden Restaurants' (DRI +0.7%) proposed spin-off of Red Lobster is Starboard Value, which in an open letter writes, "We believe a separation of Red Lobster as currently conceived could destroy substantial value" and could be "potentially even worse for shareholders than the status quo."
  • Starboard believes a spin-off would create a new public entity "with a single poorly performing restaurant concept that we would expect to trade at a steep discount to Darden and other peers," damage Darden's ability to realize the value of its real estate holdings, and fails to address the underlying drivers of underperformance ("a bloated cost structure, a lack of focus on restaurant operations, and an inefficient asset base and capital structure").
  • Instead, the activist "implore[s] management and the Board to delay the impending separation of Red Lobster to allow time for a broader exploration of available alternatives, as well as to provide sufficient time for communications with shareholders."
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