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Darden up on report of hedge fund investment

The Associated Press

Darden Restaurants Inc. shares jumped Wednesday on a report that a hedge fund bought a stake in Darden and is pushing to split up the restaurant company.

THE SPARK: The Wall Street Journal reported that Barington Capital Group LP has taken a 2.8 percent stake in Darden, the parent of Olive Garden, Red Lobster and other restaurant chains. That would make Barington Darden's fifth-largest shareholder, according to FactSet.

The newspaper, citing unnamed sources close to the matter, said that Barington is pushing for Darden to form two separate companies. Barington later confirmed that it has had talks with Darden's management.

THE BIG PICTURE: Darden, based in Orlando, Fla., operates more than 2,100 restaurants across North America. It has struggled with slower sales trends as consumers have grown more selective about where they spend their money.

Darden said in a statement that it "welcomes input toward the goal of enhancing shareholder value." As a policy, the company does not comment on specific talks with shareholders but confirmed it has a "dialogue" with Barington.

The company said its board will take the time necessary to evaluate the firm's suggestions, just as it would for any shareholder.

Barington said in a statement that it also doesn't typically comment on private talks but said that it has met and had follow-up discussions with members of Darden's senior management team.

"We believe that Darden has the potential to deliver significantly higher returns to shareholders and anticipate continuing our ongoing dialogue regarding measures to improve the company's financial and share price performance," Barington said in a statement.

Barington said it represents a group of stockholders that collectively owns more than 2 percent of Darden's outstanding shares.

Darden earned 53 cents per share for its fiscal first quarter that ended in August on revenue of $2.16 billion, which was helped by added locations; both measures fell short of market forecasts.

SHARE ACTION: Shares jumped $3.29, or more than 7 percent, to $49.57. Its shares have traded between $44.11 and $55.90 in the past 52 weeks.