Food & Beverage

Starboard wins consent of 54% of Darden shareholders for special mtg: Sources

Starboard wins consent for special meeting

The hedge fund Starboard Value on Tuesday won consent from 54 percent of Darden shareholders to call a special meeting, sources familiar with the issue told CNBC. That gives the restaurant company a 60-day deadline to call the meeting and consider a nonbinding shareholder proposal.

Darden shares rallied after the news. Starboard is run by activist investor Jeffrey Smith, who has been waging a public campaign to keep Darden from spinning off its Red Lobster restaurants into a stand-alone company.

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The news came about an hour after Smith told CNBC that such a spin off could wipe out hundreds of millions of dollars in value and that Darden's CEO should be on the "hot seat" for considering such a strategy.

Case against Red Lobster spinoff

Darden wants to spin off Red Lobster from its main stable of restaurant chains, including Olive Garden and LongHorn Steakhouse. Smith, founder and CEO of Starboard, opposes the spinoff, citing high seafood prices and struggling foot traffic at Red Lobster restaurants.

"The Red Lobster separation doesn't make a lot of sense," Smith said on "Squawk on the Street." "Shareholders are voicing their opinions very strongly that they are not in favor. Research analysts have been against this separation again. ... You would think management and the board would have gotten the message long before now that change is being required."

During the interview with CNBC, Smith said he was confident he could muster 50 percent support from outstanding shareholders to secure a consent solicitation and convene a special meeting of the board.

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Speaking from the Active-Passive Investor Summit in New York City, Smith noted the 50 percent threshold was a high hurdle, but he remained confident in his success.

Asked whether he wanted to see Darden shake up management and remove CEO Clarence Otis Jr., Smith said: "So is Mr. Otis, in a hot seat? I think he is in a hot seat."

—By CNBC's Jeff Morganteen. CNBC's David Faber and Reuters contributed to this report.