Key takeaways from Barington Group's 84-page Darden proposal (Part 1 of 9)
Barington Capital Group
Barington Capital Group recently released an 80-page presentation explaining how Darden Restaurants Group Inc. (DRI) could unlock value, given the company’s lackluster return over the last few years compared to its peers. The Hedge Fund has stepped up its pressure on, claiming that if its proposed recommendations are undertaken, Darden should be worth $71 to $80 a share—higher than the earlier estimate of $69 to $76 per share.
Darden Restaurants Group Inc. (DRI) is the largest casual dining restaurant in the United States. It owns several well-known brands: Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Season 52, Eddie V’s Prime Seafood, Yard House, and Bahama Breeze. These are categorized into four segments: Red Lobster, Olive Garden, LongHorn Steakhouse, and Specialty Brands.
Value creation from acquisition
Over the past few years, Darden has embarked on multiple acquisitions in an attempt to achieve synergy. Darden isn’t the only company that has taken this route. Companies like McDonalds Corp. (MCD) and Brinker International Inc. (EAT) have tried it in the past, only to conclude later that performance usually trails.
Proposing a split
Given the lackluster returns over the past few years relative to the company’s main peers like Bloomin’ Brands (BLMN), CheeseCake Factory (CAKE), and Texas RoadHouse (TXRH), activist hedge fund Barington Capital Group is proposing breaking the company into three parts: Red Lobster and Olive Garden, Specialty Group Brands, and a REIT (Real Estate Investment Trust).
This series will explore some of the major points within Barington’s recent presentation.
Browse this series on Market Realist:
- Part 2 - Why Darden underperformed its peers by about 100% over 3 years
- Part 3 - Darden’s poor margins show divergence from management’s expectation
- Part 4 - Why Darden’s ineffective marketing strategy is hurting profits
- Consumer Discretionary
- Red Lobster
- Olive Garden