Starboard Value is launching a fight to take over the board of Darden Restaurants, saying the planned sale of Darden's Red Lobster seafood chain is "a value-destructive transaction" that ignores the rights of shareholders.
A letter to be sent to shareholders on Thursday will say that Starboard believes "wholesale board change" is needed at Darden to reverse years of poor performance, poor governance and shareholder value destruction, a person close to Starboard said.
Darden said last week it would sell Red Lobster to private equity firm Golden Gate Capital for $2.1 billion, defying Starboard and another activist investor that had opposed the sale of the struggling chain.
Starboard, which owned about 5.5 percent of Darden as of May 14, had led a shareholder effort to force Darden to hold a special meeting that would vote on the sale.
Darden has said the deal is expected to close in the quarter ending August and is not subject to shareholder approval.
A Darden spokesman said in an email that the board would consider the Starboard nominations "in due course."
Darden, which also operates Olive Garden, LongHorn Steakhouse and Capital Grille restaurants, has said it will file a preliminary proxy statement later this month for the requested meeting and will convene it "as promptly as practicable."
Starboard will tell Darden shareholders that because of the tax-inefficent way the deal was structured, Darden netted only $100 million from the sale of the Red Lobster business after taking into account $1.5 billion it believed could have been realized from the tax-efficient sale of real estate.
The letter will say that on this basis, the sale of the operating business was done at multiple of less than 1-time earnings before interest, tax depreciation and amortization.
Starboard will nominate a full slate of 12 board candidates for election at Darden's annual meeting, the source said.
The date of the meeting has not been announced.
The nominees include Brad Blum, who Starboard said had turned around the Olive Garden chain when he was president of that operation between 1994 and 2002.
Another activist investor, Barington Capital, which represents shareholders holding more than 2 percent of Darden, has been pressing Darden to combine its more-mature Red Lobster and Olive Garden chains into one company and its higher-growth LongHorn and Capital Grille operations into another.
Darden's shares have fallen about 4 percent since the Red Lobster deal was announced.