Starboard Value's letter to the Darden Restaurants board (July 2014)

About this letter

Jeffrey C. Smith, managing member of Starboard Value, sent this letter to the board of Darden Restaurants on 15 July 2014, and Starboard filed it with the SEC as soliciting material ahead of a proxy contest for board seats at the 2014 annual meeting. It opens with a quotation from the founder, Bill Darden, on the importance of good people, and argues that the company's core values had been replaced by a corporate bureaucracy with poor leadership and excessive spending.

Starboard recalls that it had communicated its views privately and publicly since 2013, warning of the risks of jettisoning Red Lobster, the group's first brand. The letter was written after the board went ahead with the Red Lobster Sale. It covers the value Starboard believes the sale destroyed, Darden's share price record against peers, the director slate Starboard had assembled, and its view of what the remaining company is worth.

What to notice

1. 1

   Starboard argues the board should have known the Red Lobster Sale would destroy at least $800 million of shareholder value, and likely well over $1 billion against Red Lobster's true value inside Darden.

“It is time to get back to basics: great people, great food, fair prices, and an enhanced customer experience.”