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Starboard Value Says Proposed Red Lobster Chain Separation Is Wrong Spin-off

Investment firm Starboard Value LP, which holds a 5.5 percent stake in restaurant operator Darden Restaurants Inc. (DRI), said Tuesday that Darden's plan to spin off the Red Lobster chain was the wrong spin-off, at the wrong time, and for the wrong reasons.

In December 2013, Darden said it was looking to sell or spin-off its struggling Red Lobster chain. But Starboard objected to the proposal and urged Darden to delay the separation and seek comprehensive alternatives.

New York-based Starboard said Tuesday that it has issued an investor presentation expressing its serious concerns with the proposed separation of Red Lobster. The activist investor added that a special meeting of Darden's shareholders was necessary to provide shareholders with a forum to express their views and influence the future of Red Lobster "before it was too late".

According to Starboard, Darden appeared to be intent on completing the Red Lobster separation prior to the 2014 annual meeting of shareholders, when all directors are up for election.

Starboard also said that it has issued a detailed presentation entitled "A Primer on Darden's Real Estate" that outlines the substantial value intrinsic to Darden's real estate and a number of highly attractive alternatives for Darden's real estate assets. Also in the Real Estate Primer, Starboard has refuted Darden's misleading statements regarding debt breakage costs, among other things.

In late March, another investment firm Barington Capital Group L.P. urged the independent directors of Darden to replace Chairman and Chief Executive Officer Clarence Otis, while objecting to spin-off plans for the Red Lobster chain.

In a missive to the independent directors, Barington opined that Darden stock was undervalued and that Clarence Otis needed to do more to steer the company's eight brands and real estate holdings. Barington said it believes Darden's performance has tumbled under Otis, and agreed with Starboard Value to obtain shareholders nod before spinning off Red Lobster.

Barington has also asked the independent directors to explore comprehensive restructuring alternatives that include the separation of Olive Garden brand.

DRI closed Monday's regular trading session at $50.76, up $0.14 or 0.28 percent on a volume of 865,204 shares.

by RTT Staff Writer

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