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Starboard released an investor presentation this morning, detailing its analysis of Darden management and the proposed Red Lobster spin-off.  Starboard believes Darden’s real estate portfolio is worth approximately $4 billion and that separating Red Lobster and its real estate from Darden’s portfolio would destroy approximately $850 million in value.

The presentation was deservedly highly critical of Darden’s current management team and is a must-read for interested parties.  Below, we highlight what we believe are the most important quotes from the 100+ page deck. 

A Perpetual Self-Serving Agenda

  • “It appears that the Red Lobster Separation was designed to benefit management, not shareholders.”
  • “We believe Darden has historically shown a blatant disregard for shareholder concerns, a propensity to silence critics, and is similarly now trying to avoid shareholder concerns and input when it comes to the Red Lobster Separation.”
  • “It appears the Board is going to great lengths to ensure that shareholders DO NOT have a say in the Red Lobster Separation.”
  • “We question whether compensation decisions are motivating management to rush the separation of Red Lobster.”
  • “We believe the current management team and Board have a long history of self-interested behavior and disregard for shareholders’ interests.”

Shareholder-Unfriendly Corporate Governance

  • “Darden maintains shareholder-unfriendly corporate governance provisions.”
  • “We do not believe the Board would sanction what we would view as an egregious violation of good corporate governance, like proceeding with the Red Lobster Separation in direct opposition to a clear shareholder directive, especially just months before a potential election contest.”
  • “Despite significant criticism from leading governance firms and shareholders regarding Darden’s poor governance practices, the Company has actually taken steps to further disenfranchise shareholders.”
  • “Darden’s corporate governance is unacceptable and recent Bylaw amendments have made things even worse.”
  • “Darden’s new Bylaw amendments serve to exacerbate Darden’s already alarming corporate governance concerns.”
  • “Rather than look out for the best interests of shareholders, it appears that Darden's Board has taken steps to further entrench themselves.”

Premeditated, Misleading Statements

  • “Management’s arguments in support of the Red Lobster Separation are highly misleading.”
  • “Management has misled shareholders regarding customer demographics at Red Lobster and Olive Garden.”
  • “Management has misled shareholders regarding potential debt breakage costs.”
  • “Management has misled shareholders regarding their own performance.”

The Ill-Advised Wall of Silence

  • “We are troubled by the Company’s continued attempts to avoid open discussion on what we believe to be the most important and difficult issues facing the Company.”
  • “Darden has a long history of silencing critics and trying to avoid an active dialogue on the key issues facing the company.”
  • “Management refuses to share key supporting assumptions to demonstrate how the Red Lobster Separation will create value.”
  • “Management has not adequately addressed Darden’s real estate value.”
  • “Despite repeated inquiries, management has refused to disclose the key valuation assumptions used for Red Lobster in the analysis that led management to conclude that the Red Lobster Separation is the best alternative available to create value for shareholders.”

Howard Penney

Managing Director

Fred Masotta

Analyst