NEW YORK - An activist investor has won all 12 seats on the board of Olive Garden's parent company Darden Restaurants (DRI), according to preliminary results announced by the company.
Starboard Value was seeking to replace the entire board with its own nominees at the company's annual meeting Friday. The hedge fund has criticized Darden's management of Olive Garden, as well as how the company handled the sale of Red Lobster.
Both Olive Garden and Red Lobster suffered declining sales in recent years, and Darden's management has acknowledged the need for changes. The company has been trying to update the menu and marketing for Olive Garden and noted there have been signs of improvement, including a slight bump in sales for September.
At the meeting in Florida, Starboard CEO Jeff Smith stood to introduce himself and the new board members before voting results had been announced. Smith noted Starboard has already begun "to work with the management team to ensure a seamless transition."
It's not clear what changes Starboard will push for right away, but the hedge fund had said in a 294-page presentation last month that Darden should spin off its real estate holdings. It also noted Darden could cut costs with changes like outsourcing the production of its soup base and reducing its ranks of full-time workers.
Sara Senatore, a Bernstein analyst, noted that Starboard's nominees may be in agreement with Starboard on big matters, but likely won't rubberstamp the firm's suggestions. She noted the nominees have respectable credentials and don't want to be seen as "patsies" for Starboard.
Although complete board turnovers are rare, the results in the Darden case aren't entirely surprising. Two large advisory firms, Institutional Shareholder Services and Glass, Lewis & Co. had recommended that shareholders vote in favor of Starboard's nominees.
Darden had already said it would cede four of the 12 board seats to Starboard, but had warned shareholders that handing the entire board over would upend the progress it was making at Olive Garden.
In July, Darden also announced longtime CEO Clarence Otis would step down by the end of this year. A successor hasn't yet been named.