Darden at risk of losing board control in proxy vote -analysts

By Lisa Baertlein

Oct 8 (Reuters) - Activist investor Starboard Value LP appears poised to gain control of Darden Restaurants Inc's board at the company's annual shareholder meeting on Friday, analysts said.

"I think it's likely that Starboard will get a majority," said B. Espen Eckbo, who founded the Lindenauer Center for Corporate Governance at Dartmouth College's Tuck School of Business, echoing the sentiment of several Wall Street analysts who cover the company best known for its Olive Garden chain.

Miller Tabak & Co analyst Stephen Anderson said he expects Starboard to gain "at least a majority of seats."

Starboard is seeking to replace Darden's entire 12-member board, the sort of turnover that is rare.

Large advisory firms Institutional Shareholder Services (ISS) and Glass, Lewis & Co recommended in late September that Darden investors cast their votes for the entire Starboard slate.

Darden declined to comment.

The Orlando, Florida-based company repeatedly has warned that a complete board ouster is risky and would hand too much control to Starboard. Darden has won the support of smaller advisory firm Egan-Jones Proxy Services, which recommended that investors vote for the company's slate, which leaves four spots open for Starboard's top-finishing candidates.

Many investors have not disclosed their votes ahead of the annual meeting on Oct. 10, but the California State Teachers' Retirement System (CalSTRS), which had 230,300 Darden shares valued at $14.9 million at the end of September, said it voted with Starboard, which is part of a group of activist managers for the massive retirement fund.

To be sure, CalSTRS holds just a small stake in Darden.

Starboard is Darden's second-largest shareholder with beneficial ownership of more than 11.6 million shares, which works out to a roughly 8.8 percent stake.

Friday's planned vote follows a long and dramatic standoff between Darden and activists Starboard and Barington Capital Group LP, which are seeking sweeping changes at the underperforming restaurant group that also owns LongHorn Steakhouse and Capital Grille.

Darden appears to have hurt its relationship with shareholders when it went ahead with the sale of Red Lobster without holding a special meeting voted for by a majority of company investors who sought to weigh in on the deal.

Darden was within its legal rights to sell Red Lobster without shareholder approval, but the move served to further frustrate some already disgruntled investors.

"They have already demonstrated their lack of respect for their shareholders," Anne Sheehan, CalSTRS director of corporate governance, said. "They're paying the price for that now. We think it is important to get some new blood in that boardroom." (Reporting by Lisa Baertlein in Los Angeles; Editing by Richard Chang)

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