Darden: Red Lobster Sold, Investors Still Punchy

The sale of Red Lobster is official. Now the chairman and CEO of Darden Restaurants, Clarence Otis Jr., is stepping down after waging a months-long fight with activist hedge funds opposed to his turnaround plans for the company.

Otis—the 2012 recipient of the International Foodservice Manufacturers Association’s Silver Plate Award—will retire as CEO when the board chooses his successor or by year-end. After serving out his remaining term as director, he’ll be succeeded as chairman by Charles Ledsinger Jr., Darden’s lead independent director. The moves came on July 28, the day Darden completed the sale of the Red Lobster, a transaction that was vigorously opposed by two activist investor funds.

While Darden sees the $2.1 billion sale of Red Lobster to Golden Gate Capital as one that maximized the chain’s value, some hostile shareholders disagreed. In an effort to end hostilities with hedge fund Starboard Value, the Orlando, Fla.-based company plans to nominate just nine of 12 directors to its board, ensuring that the hedge fund can claim three board seats.

“It is a shame for all Darden shareholders that this change happened only after the board sanctioned the destruction of a billion dollars in shareholder value by approving the Red Lobster sale against the vehement objections of its shareholders,” Starboard CEO Jeffrey Smith said in a statement.

Darden owns and operates more than 1,500 restaurants generating approximately $6.3 billion in annual sales.