Darden Restaurants (DRI:US) Inc., the owner of Olive Garden and Red Lobster, said splitting off its real estate holdings wouldn’t increase shareholder value, rejecting a strategy pushed by activist investors.
Darden spurned the idea after consulting with financial advisers Goldman Sachs Group Inc. (GS:US) and Morgan Stanley (MS:US), according to a statement today. The company’s board also worked with law firm Wachtell, Lipton, Rosen & Katz to assess the demands.
Darden is facing increased pressure from activists, including Starboard Value LP and Barington Capital Group LP, to spin off its restaurant properties and shake up company management. The real estate is worth about $4 billion, Starboard said this week.
“A real estate separation would not enhance long-term shareholder value,” Darden responded in today’s statement. “The company will review the latest Starboard materials and looks forward to addressing them in its ongoing conversations with Darden shareholders.”
Shares of the Orlando, Florida-based company have declined 5.3 percent this year. The stock gained 1.4 percent to $51.48 at the close today in New York.
Last week, Barington asked Darden to consider replacing Chief Executive Officer Clarence Otis, saying the company has underperformed during his tenure and that his restructuring plan may destroy value. Otis, who became CEO in 2004 and chairman in 2005, is working to separate Darden’s Red Lobster seafood chain through a tax-free spinoff or sale. Starboard has joined Barington in opposing Otis’s plan.
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