Slide 1: Investor Presentation Darden Restaurants, Inc.
Investor Presentation Darden Restaurants, Inc. March 31, 2014
Slide 2: Table of Contents
TABLE OF CONTENTS I. Executive summary II. Serious concerns about the Red Lobster Separation A. Operational concerns B. Timing concerns C. Valuation concerns D. Real estate concerns E. Investment community’s reaction III. Management’s arguments for separating Red Lobster are incomplete and misleadin
Slide 3: I. Executive summary
I. Executive summary STARBOARDQJALUE 3
Slide 4: Overview of Starboard Value LP
Overview of Starboard Value LP Starboard Value LP is a deep value oriented investment firm that specializes in investing in underperforming companies and analyzing alternative strategies to unlock value for the benefit of all shareholders. – Our approach to investment research begins with a deep f
Slide 5: We have serious concerns about the Red Lobster Separation
We have serious concerns about the Red Lobster Separation and shareholders have the right to be heard We believe management is attempting to force through a poorly conceived and potentially value destructive separation of Red Lobster despite the objections of certain significant shareholders. On D
Slide 6: Shareholders have the right to be heard (cont'd)
We have serious concerns about the Red Lobster Separation and shareholders have the right to be heard (cont’d) Shareholders should not trust management and the Board to rush this critical decision. We believe Darden has historically shown a blatant disregard for shareholder concerns, a propensity
Slide 7: Management appears to be rushing to separate Red Lobster
Management appears to be rushing to separate Red Lobster prior to the 2014 Annual Meeting Management has proposed what we believe to be an ill-advised plan and appears to be rushing to complete a Red Lobster transaction before the 2014 Annual Meeting. Management appears to be targeting completion
Slide 8: We have serious concerns about the proposed Red Lobster Separation
We have serious concerns about the proposed Red Lobster Separation Management’s plan to spin off Red Lobster is the wrong spin-off, at the wrong time, for the wrong reasons. We, as shareholders, have serious concerns about Darden’s proposed plan to separate Red Lobster and believe it could be both
Slide 9: Operational concerns: Red Lobster's profitability has declined
Operational concerns: Red Lobster’s profitability has declined substantially Over the past 5 years, Red Lobster’s EBITDA margins have declined from 11.9% to 9.3% due to same-store- sales declines and significant increases in operating expenses. Historical Operating Results ($ in millions) 12-months
Slide 10: Timing concerns: why is management in such a rush
Timing concerns: We seriously question why management appears to be in such a rush to separate Red Lobster Given Red Lobster’s significant underperformance and temporary commodity price headwinds, we question why management appears to be rushing a separation. 10% 5.9% Same-store-sales growth has 5
Slide 11: Valuation concerns: New Red Lobster discount to peers
Valuation concerns: New Red Lobster is likely to trade at a substantial discount to casual dining peers We believe, and sell-side analysts appear to agree, that a standalone Red Lobster would have trouble attracting an investor base. Red Lobster, as a standalone public Company, given its lack of u
Slide 12: Substantial discount to casual dining peers (cont'd)
Valuation concerns: New Red Lobster is likely to trade at a substantial discount to casual dining peers (cont’d) Should New Red Lobster trade substantially below Darden’s current multiple, Darden post separation (“New Darden”) would need to trade at a significantly higher multiple than where it curr
Slide 13: Real estate concerns: Darden's real estate is highly valuable
Real estate concerns: We believe Darden’s real estate is highly valuable We believe that Darden’s real estate is highly valuable, and that the Red Lobster Separation, as conceived by management, could permanently impair that value. Our extensive research has indicated that: 1. Darden’s real estate
Slide 14: Separating Red Lobster could impair real estate value
Real estate concerns: Separating Red Lobster could impair Darden’s real estate value Separating Red Lobster with its real estate could destroy significant shareholder value. If Red Lobster were separated and traded at 6.5x EBITDA (in-line with analyst projections), this would imply that the market
Slide 15: A Special Meeting is absolutely necessary
A Special Meeting is absolutely necessary to protect shareholder interests At the Special Meeting, we will seek shareholder approval for the following non-binding proposal: to approve a non-binding resolution urging the Board not to approve any agreement or proposed transaction involving a separatio
Slide 16: The Special Meeting is an opportunity to send a message
The Special Meeting is an opportunity to send a loud and clear message to the Board The Special Meeting will be an opportunity to send a loud and clear message to the Board that shareholders deserve a say on this vital decision. If we are successful in calling a Special Meeting, the Board should n
Slide 17: Management and the Board have not earned the right to rush
Management and the Board have not earned the right to rush this critical and irreversible decision Management and the Board have a record of poor shareholder returns. Darden’s stock price has materially underperformed both the broader equity markets, its Proxy Peer Group and its closest direct compe
Slide 18: Weak historical operating performance (cont'd)
Management and the Board have not earned the right to rush this critical and irreversible decision (cont’d) Management and the Board have a record of weak historical operating performance. Same-store-sales (SSS) and traffic at both of Darden’s largest brands have deteriorated significantly. Red Lobs
Slide 19: Fully-leased EBITDA margins below peers
Management and the Board have not earned the right to rush this critical and irreversible decision (cont’d) Adjusting for real estate ownership, Darden’s margins are significantly below peers, despite the fact that it has an enormous scale advantage and is led by Olive Garden, which should be an ext
Slide 20: Capex and acquisitions spending and return on capital
Management and the Board have not earned the right to rush this critical and irreversible decision (cont’d) Since Mr. Otis became CEO in 2004, Darden has spent $6.1 billion – or $46.50 per current Darden share – on capital expenditures and acquisitions to fund revenue and EPS growth. Darden’s hist
Slide 21: Management and Board tenure of underperformance
Management and the Board have not earned the right to rush this critical and irreversible decision (cont’d) The current management team and Board have a long tenure of underperformance. Management and Board Stock price performance vs. proxy Name Role # of years at Darden peer group since start date
Slide 22: History of disregarding shareholders' interests
The current management team and Board have a long history of disregarding shareholders’ interests Darden maintains shareholder-unfriendly corporate governance provisions: Action by written consent strictly prohibited. Darden requires at least 50% of the voting power for shareholders to call a sp
Slide 23: Disregarding shareholders' interests: Bylaw amendments
The current management team and Board have a long history of disregarding shareholders’ interests (cont’d) Despite significant criticism from leading proxy advisory firms and shareholders regarding Darden’s poor governance practices, the Company has actually taken steps to further disenfranchise sha
Slide 24: Blatant disregard for shareholder concerns
Darden has shown a blatant disregard for shareholder concerns and a propensity to silence critics We are troubled by the Company’s continued attempts to avoid open discussion on the most important and difficult issues facing the Company. We believe Darden has avoided addressing shareholder concern
Slide 25: Darden is in need of substantial change
Darden is in need of substantial change According to a recent poll conducted by sell-side research firm Hedgeye Risk Management, 84% of respondents said that they did not believe that management’s plan to spin-off Red Lobster would create value. In a separate survey, Bernstein Research found tha
Slide 26: II. Serious concerns about the Red Lobster Separation
II. Serious concerns about the Red Lobster Separation 26
Slide 27: We have serious concerns about the proposed Red Lobster Separation
We have serious concerns about the proposed Red Lobster Separation Management’s plan to spin off Red Lobster is the wrong spin-off, at the wrong time, for the wrong reasons. We, as shareholders, have serious concerns about Darden’s proposed plan to separate Red Lobster and believe it could be both
Slide 28: A. Operational concerns
A. Operational concerns STARBOARDQJALUE 28
Slide 29: Restaurant level operations have deteriorated
Restaurant level operations have deteriorated Over the past three quarters, SSS and traffic have declined by an average of 6.2% and 9.2%, respectively. While management has attempted to offset traffic declines with higher prices, this appears to have caught up to them and has further exacerbated tra
Slide 30: Red Lobster's profitability has declined substantially
Red Lobster’s profitability has declined substantially Over the past 5 years, Red Lobster’s EBITDA margins have declined from 11.9% to 9.3% due to same-store- sales declines and significant increases in operating expenses. Historical Operating Results ($ in millions) 12-months ended FY 2014 Fiscal Y
Slide 31: Red Lobster's margins significantly lower than peers
Despite higher than average AUVs and higher average ticket than peers, Red Lobster’s margins are significantly lower than peers We question the decision to spin off Red Lobster when its financial performance is among the worst in the casual dining industry. Due to its high AUVs and its best-in-cla
Slide 32: Adjusting for owned real estate, EBITDA margin is worse
When adjusting for Red Lobster’s owned real estate, its EBITDA margin is significantly worse than peers After adjusting Red Lobster and its peers to a fully-leased basis (by adding implied market rent on owned real estate), Red Lobster’s EBITDA margin is significantly worse. Red Lobster has underp
Slide 33: Announced Red Lobster turnaround initiatives are weak
The Company’s announced initiatives to turn around Red Lobster are weak The Company’s “three-pronged approach and multi-year plan to drive sales and profitability” is unimpressive and vague. From Darden’s March 3rd presentation: Further, even these weak turnaround initiatives can easily be achieved
Slide 34: B. Timing concerns
B. Timing concerns STARBOARDQJALUE 34
Slide 35: Why is management in such a rush to separate Red Lobster
We seriously question why management is in such a rush to separate Red Lobster Given Red Lobster’s significant underperformance and temporary commodity price headwinds, we question why management appears to be rushing a separation. 10% 5.9% Same-store-sales growth has 5% declined from 5.9% in 3Q12
Slide 36: Temporary shrimp price increase impacted margins
A temporary shrimp price increase has further impacted margins, but will moderate by next year Shrimp prices increased at an unprecedented rate in FY 2014 due to a blight that struck the shrimp population in Southeast Asia. Prices for white shrimp, a major input for Red Lobster, rose as much as
Slide 37: Same management team to oversee New Red Lobster
Darden has chosen much of the same management team to oversee New Red Lobster Rather than conducting a full evaluation of the best external and internal candidates to oversee an independent Red Lobster, Darden is instead looking to appoint much of the same team that has overseen the business in an a
Slide 38: Company appears to be tossing aside Red Lobster turnaround
Rather than instituting a comprehensive turnaround plan for Red Lobster, the Company appears to be tossing it aside Red Lobster’s business has deteriorated and it is in desperate need of operational improvements and brand repositioning. Same-store-sales and traffic have declined substantially. S
Slide 39: Compensation decisions motivating the rush to separate
We question whether compensation decisions are motivating management to rush the separation of Red Lobster Given Red Lobster’s challenges, we seriously question the rationale for rushing to separate the business prior to making material improvements and despite the objections from some of the Comp
Slide 40: Darden spent significant capital to fund growth
Historically, Darden spent significant capital to fund growth, possibly for compensation purposes, even while returns were deteriorating Since Mr. Otis became CEO in 2004, Darden has spent $6.1 billion – or $46.50 per current Darden share – on capital expenditures and acquisitions to fund revenue
Slide 41: Spending allowed management to hit bonus targets
Darden’s significant spending allowed management to hit bonus targets despite poor shareholder returns compared to peers Darden’s aggressive spending on acquisitions and capital expenditures allowed the CEO to receive bonus awards that averaged approximately 91% of his bonus targets from 2007 to 2
Slide 42: Red Lobster drove missed 2013 compensation targets
Red Lobster was a key driver in management missing its 2013 compensation targets For 2013, Darden’s board set senior management’s annual bonus target to be largely based on diluted net EPS growth of 11.7% and net sales growth of 9.8%.(1) In 2013, Darden’s total adjusted EPS actually declined 9.8
Slide 43: Compensation changes make owning Red Lobster unfavorable
Recent changes to Darden’s compensation programs make owning Red Lobster unfavorable from management’s standpoint Due to public shareholder pressure around management compensation and the misalignment of interests between management’s prior compensation plan and shareholders’ interests, Darden mad
Slide 44: At some point, it may be appropriate to separate Red Lobster
At some point, it may be appropriate to separate Red Lobster To be clear, we are not saying that the Company should never separate Red Lobster, or any other restaurant concept, but rather that now is not the right time to separate Red Lobster. Before rushing to separate Red Lobster, we believe a m
Slide 45: C. Valuation concerns
C. Valuation concerns STARBOARDQJALUE 45
Slide 46: New Red Lobster likely to trade at discount to peers
New Red Lobster is likely to trade at a substantial discount to casual dining peers We believe, and sell-side analysts appear to agree, that a standalone Red Lobster would have trouble attracting an investor base. Red Lobster, as a standalone public Company, given its lack of unit growth, declinin
Slide 47: Potential value destruction in a Red Lobster spin-off
New Red Lobster is likely to trade at a substantial discount to casual dining peers (cont’d) Should New Red Lobster trade substantially below Darden’s current multiple, Darden post-separation would need to trade at a significantly higher multiple than where it currently trades just to get the combin
Slide 48: D. Real estate concerns
D. Real estate concerns STARBOARDQJALUE 48
Slide 49: Separating Red Lobster could impair real estate value
Separating Red Lobster could impair Darden’s real estate value We believe that Darden’s real estate is highly valuable, and that the Red Lobster Separation, as conceived by management, could permanently impair that value. Our extensive research has indicated that: 1. Darden’s real estate is worth
Slide 50: Real estate in New Red Lobster is inefficient
Allowing the real estate to reside within New Red Lobster is inefficient from a valuation and tax standpoint A substantial portion of New Red Lobster’s income will be attributable to its real estate ownership, rather than its operating business. Because Red Lobster represents a substantial portion
Slide 51: New Red Lobster to trade at discount to REITs
Allowing the real estate to reside within New Red Lobster is inefficient from a valuation and tax standpoint (cont’d) New Red Lobster is likely to trade at a substantial discount to where REITs trade. As discussed above, given New Red Lobster’s declining same-store-sales and subpar margins, we bel
Slide 52: Real estate value trapped in New Red Lobster
Allowing the real estate to reside within New Red Lobster is inefficient from a valuation and tax standpoint (cont’d) Separating Red Lobster with its real estate could destroy significant shareholder value. If Red Lobster were separated and traded at 6.5x EBITDA (in-line with analyst projections),
Slide 53: Separation could permanently impair real estate value
The Red Lobster Separation could permanently impair real estate value Not only is Red Lobster’s real estate worth more to a real estate owner than it is inside of New Red Lobster, by spinning out Red Lobster before separating the real estate, that value may be permanently impaired. When valuing re
Slide 54: E. Investment community's reaction
E. Investment community’s reaction 54
Slide 55: Research analysts voice concern about Red Lobster separation
Wall street research analysts have voiced their concern and skepticism regarding a Red Lobster separation “We find it odd management believes value can be created “On the day Darden’s strategic plan was announced, the by separating the business into two mature stock closed down 4% to $51. This didn’
Slide 56: Research analysts voice concern (cont'd)
Wall street research analysts have voiced their concern and skepticism regarding a Red Lobster separation “Darden also issued its most detailed defense of its “…But we continue to believe [management’s] plan planned spin-off (or sale) of Red Lobster. However, it doesn't address RL problems for inves
Slide 57: Surveyed shareholders question proposed separation
Surveyed shareholders have also questioned management’s proposed separation According to a recent poll conducted by sell-side research firm Hedgeye Risk Management, 84% of respondents said that they did not believe that management’s plan to spin-off Red Lobster would create value. In a separate
Slide 58: III. Management's arguments are incomplete and misleading
III. Management’s arguments for separating Red Lobster are incomplete and misleading 58
Slide 59: Management's arguments are highly misleading
Management’s arguments in support of the Red Lobster Separation are highly misleading We do not believe that management has made a compelling case that the Red Lobster Separation will create meaningful long-term value for Darden shareholders for the following reasons: 1 Management’s stated rationale
Slide 60: Management's rationale for separation is questionable
1 Management’s rationale for the Red Lobster Separation is questionable New Red Lobster Form 10 Concerns Allow each independent company to We do not see any reason why Red Lobster design and implement corporate strategies cannot implement brand specific strategies Strategic focus and policies that a
Slide 61: Management's rationale questionable (cont'd)
1 Management’s rationale for the Red Lobster Separation is questionable (cont’d) New Red Lobster Form 10 Concerns Allow each company to tailor their If this is the goal, the split between respective allocation of capital and capital concepts should be growth vs. mature, not Capital allocation struct
Slide 62: Management refuses to share key supporting assumptions
2 Management refuses to share key supporting assumptions to demonstrate how the Red Lobster Separation will create value Despite repeated inquiries, management has refused to disclose the key valuation assumptions used for Red Lobster in the analysis that led management to conclude that the Red Lobs
Slide 63: Refuses to share assumptions (cont'd)
2 Management refuses to share key supporting assumptions to demonstrate how the Red Lobster Separation will create value (cont’d) We believe, and sell-side analysts seem to agree, that a standalone Red Lobster, if spun off in its current state, would trade at a very low multiple, and therefore follo
Slide 64: Misled shareholders on customer demographics
3 Management has misled shareholders regarding customer demographics at Red Lobster and Olive Garden Management has argued that the primary operational rationale for the separation is that Red Lobster’s customer base is different from Olive Garden’s, and therefore Red Lobster needs a different focus
Slide 65: Customer demographics very similar (cont'd)
3 Management has misled shareholders regarding customer demographics at Red Lobster and Olive Garden (cont’d) The customer demographics at Red Lobster and Olive Garden are actually very similar. The chart below, which uses the very same data from management’s chart, is what management should have
Slide 66: Average household income and population
3 Management has misled shareholders regarding customer demographics at Red Lobster and Olive Garden (cont’d) The customer demographics at Red Lobster and Olive Garden are actually very similar (cont’d). As part of their real estate analysis, Green Street looked at the demographics of each of Dard
Slide 67: AUV comparison of concepts
3 Management has misled shareholders regarding customer demographics at Red Lobster and Olive Garden (cont’d) Based on the Average Unit Volume (AUV) of each concept, Olive Garden and LongHorn are much closer to Red Lobster than they are to SRG. Mainstream casual dining SRG We do not understand how
Slide 68: Management has not addressed real estate value
4 Management has not adequately addressed Darden’s real estate value Management has yet to adequately respond to arguments raised publicly that a Red Lobster spin-off could substantially impair the value of Darden’s real estate. Management simply reiterates that the Company has considered options
Slide 69: Real estate value and REIT multiples
4 Management has not adequately addressed Darden’s real estate value (cont’d) Even if management is right that Darden’s real estate would sell for, or trade at, a discount to leading triple- net REITs, this does not imply that a real estate separation would not create value for shareholders. Manag
Slide 70: Misled shareholders on debt breakage costs
5 Management has misled shareholders regarding potential debt breakage costs Management has not supported its claims that a real estate transaction would involve substantial debt breakage costs. Management has said that Darden would have to pay $300-400 million in Make-Whole Payments1, because a r
Slide 71: Debt breakage costs (cont'd)
5 Management has misled shareholders regarding potential debt breakage costs (cont’d) Management has claimed that a real estate transaction would entail substantial friction costs, but has declined to provide details as to why. Management has declined to provide details on why it believes a real e
Slide 72: Covenant experts contradict company statements
5 Management has misled shareholders regarding potential debt breakage costs (cont’d) The Company’s statements seem to contradict the findings of leading covenant experts who have examined Darden’s bond agreements in detail, as well as the Company’s prior statements to bondholders. For example, Co
Slide 73: Mergers covenant
5 Management has misled shareholders regarding potential debt breakage costs (cont’d) Management appears to be citing the wrong covenants when discussing breakage costs. Mergers covenant Management has repeatedly told shareholders that any real estate transaction would necessitate costly Make-Whol
Slide 74: Covenant Review report on Mergers covenant
5 Management has misled shareholders regarding potential debt breakage costs (cont’d) The independent Covenant Review report provides convincing support for our position on the Mergers covenant. Even if management argues that the Company’s real estate does in fact constitute Darden’s assets “subst
Slide 75: Change of Control covenant
5 Management has misled shareholders regarding potential debt breakage costs (cont’d) Management appears to be citing the wrong covenants when discussing breakage costs (cont’d). Change of Control covenant Further, management has also supposedly told certain shareholders and analysts that a real e
Slide 76: Contradicts prior statements to bondholders
5 Management has misled shareholders regarding potential debt breakage costs (cont’d) Management’s current stance contradicts its prior written statements to bondholders. Management is on record as stating that its bond covenants do not apply to subsidiaries that are not structured as corporations
Slide 77: Avenues to avoid Sale/Leaseback covenant
5 Management has misled shareholders regarding potential debt breakage costs (cont’d) The are multiple avenues to avoid the Sale / Leaseback covenant. Management has also said that the Sale / Leaseback covenant would require the Company to pay Make-Whole Payments in any significant real estate tra
Slide 78: Misled shareholders regarding their own performance
6 Management has misled shareholders regarding their own performance Darden compares its stock performance to a cherry-picked peer group of just four companies – Bloomin’, Brinker, Cheesecake Factory, and Ruby Tuesday. Management fails to mention that: – Ruby Tuesday is perhaps the worst-performin
Slide 79: Performance versus all relevant peer groups
6 Management has misled shareholders regarding their own performance (cont’d) Below we show Darden’s performance compared to all of the relevant peer groups over all of the relevant time periods. By almost any measure, Darden has underperformed substantially. Most notably, Darden has underperf
Slide 80: IV. Management and the Board have a poor track record
IV. Management and the Board have a poor track record 80
Slide 81: A. Poor operating performance
A. Poor operating performance 81
Slide 82: Weak historical operational performance
Weak historical operational performance The same-store-sales (SSS) and traffic at both of Darden’s largest brands, Olive Garden and Red Lobster, has deteriorated significantly over the past two years. Red Lobster same-store-sales growth Olive Garden same-store-sales growth 15% 4% Average Average qua
Slide 83: Darden's EBITDA margin significantly worse than peers
When adjusting for Darden’s owned real estate, its EBITDA margin is significantly worse than peers Adjusting for real estate ownership, Darden’s margins are significantly below peers, despite the fact that it has an enormous scale advantage and is led by Olive Garden, which should be an extremely pr
Slide 84: Margins have not improved despite revenue and unit growth
Despite Darden’s significant revenue and unit growth, margins have not improved Because Darden is a restaurant conglomerate, one would expect greater economies of scale in SG&A. Since 2001, Darden approximately doubled both its total revenue and unit count, but SG&A as a % of sales has gotten wo
Slide 85: Darden's SG&A as % of sales far worse
Despite having a significantly larger revenue base than peers, Darden’s SG&A as a % of sales is far worse Although Darden has the most scale in the casual dining industry, it has failed to capitalize on margin expansion to drive shareholder value. LTM SG&A margin comparison ($ in millions) 14% Despi
Slide 86: SG&A as % of sales: perks and headquarters
Despite having a significantly larger revenue base than peers, Darden’s SG&A as a % of sales is far worse (cont’d) Lucrative perks – Company cars: Darden issues company cars to employees, while competitors’ employees use their own cars and get reimbursed for gas and mileage. – Private aircraft: Ma
Slide 87: Starboard's trip to Darden's headquarters
Starboard’s trip to Darden’s impressive headquarters Darden’s facilities are very impressive, but can management justify this Source: Starboard Value. excessive G&A spend? 87 Please see our accompanying presentation: A Primer on Darden’s Real Estate
Slide 88: B. Poor capital allocation
B. Poor capital allocation 88
Slide 89: Spending on acquisitions and capex led to questionable returns
Significant spending on acquisitions and capex have led to questionable returns Since Mr. Otis became CEO in 2004, Darden has spent over $6.1 billion – or $46.50 per current Darden share – on capital expenditures and acquisitions to fund revenue and EPS growth. Darden’s historical capex spend and
Slide 90: Acquisitions have not provided operating leverage
Acquisitions have not provided operating leverage Despite numerous large acquisitions, Darden has failed to achieve synergies or margin growth. We question the rationale and discipline behind previous M&A deals. Acquisition history 10/12/11: Eddie V’s 120% Cumulative 8/16/07: RARE acquisition for
Slide 91: Track record of destroying value
Track record of destroying value Darden has a history of acquiring brands at inflated prices and disposing of brands at severely discounted prices. Yard House acquisition Smokey Bones sale Acquired for $585 million on 7/12/2012 Sold to Sun Capital Partners for $80 million Paid more than 20x EB
Slide 92: C. History of questionable governance practices
C. History of questionable governance practices 92
Slide 93: History of self-interested behavior
We believe the current management team and Board have a long history of self-interested behavior and disregard for shareholders’ interests Darden maintains shareholder-unfriendly corporate governance provisions: Action by written consent strictly prohibited. Darden requires at least 50% of the v
Slide 94: ISS and Glass Lewis governance ratings
We believe the current management team and Board have a long history of self-interested behavior and disregard for shareholders’ interests (cont’d) ISS has given Darden a governance Quickscore of 10, indicating the HIGHEST POSSIBLE GOVERNANCE RISK The roles of Chairman and CEO have not been separa
Slide 95: New Bylaw amendments are a step in the wrong direction
Darden’s new Bylaw amendments are a step in the wrong direction Despite significant criticism from leading governance firms and shareholders regarding Darden’s poor governance practices, the Company has actually taken steps to further disenfranchise shareholders. Darden’s new Bylaw amendments serve
Slide 96: Blatant disregard for shareholder concerns
Darden has shown a blatant disregard for shareholder concerns and a propensity to silence critics We are troubled by the Company’s continued attempts to avoid open discussion on what we believe to be the most important and difficult issues facing the Company. We believe Darden has avoided addressi
Slide 97: Time and again Darden silenced critics
Time and again Darden has shown a blatant disregard for shareholder concerns and a propensity to silence critics Darden has a long history of silencing critics and trying to avoid an active dialogue on the key issues facing the Company. A recent CNBC article titled “Darden Uses Lobster Claws On Cr
Slide 98: Silencing critics (cont'd)
Time and again Darden has shown a blatant disregard for shareholder concerns and a propensity to silence critics (cont’d) Darden has a long history of silencing critics and trying to avoid an active dialogue on the key issues facing the Company. Further, on March 19, 2014, the New York Post publishe
Slide 99: V. Starboard will present a value creation plan
V. Starboard and its advisors will present a comprehensive value creation plan 99
Slide 100: Starboard will present a detailed turnaround plan for Darden
Prior to the Special Meeting, Starboard and its advisors will present a detailed turnaround plan for Darden The plan will include a full analysis of each of the value creation opportunities we have outlined and realistic supporting assumptions for each of our recommendations. 1. A substantial Comp
Slide 101: VI. Conclusion
VI. Conclusion STARBOARDQJALUE 101
Slide 102: Serious concerns about the proposed Red Lobster Separation
We have serious concerns about the proposed Red Lobster Separation Management’s plan to spin off Red Lobster is the wrong spin-off, at the wrong time, for the wrong reasons. We, as shareholders, have serious concerns about Darden’s proposed plan to separate Red Lobster and believe it could be both
Slide 103: Darden's real estate is highly valuable
We believe that Darden’s real estate is highly valuable, and that the Red Lobster Separation, as conceived by management, could permanently impair that value Our extensive research has indicated that: 1. Darden’s real estate is worth approximately $4 billion, and possibly far more. 2. Separating t
Slide 104: Improving Darden's operations would create substantial value
Improving Darden’s operations would create substantial shareholder value Stripping out Darden’s real estate “subsidy” reveals another large opportunity – an operational turnaround. The fully-leased EBITDA analysis reveals a 300 basis point margin gap between Darden and peers. – There is no structu
Slide 105: Management should evaluate ALL strategic alternatives
We think management should evaluate ALL strategic alternatives Management should not rush to close a transaction without first evaluating all available options and strategies to enhance shareholder value to the fullest. We believe the plan presented by management on December 19, 2013 and reiterate
Slide 106: A Special Meeting is absolutely necessary
A Special Meeting is absolutely necessary to protect shareholder interests At the Special Meeting, we will seek shareholder approval for the following non-binding proposal: to approve a non-binding resolution urging the Board not to approve any agreement or proposed transaction involving a separatio
Slide 107: Special Meeting is an opportunity to send a message
The Special Meeting is an opportunity to send a loud and clear message to the board The Special Meeting will be an opportunity to send a loud and clear message to the Board that shareholders deserve a say on this vital decision. If we are successful in calling a Special Meeting, we do not believe
Slide 108: Disclaimer
THIS PRESENTATION IS FOR DISCUSSION AND GENERAL INFORMATIONAL PURPOSES ONLY. IT DOES NOT HAVE REGARD TO THE SPECIFIC INVESTMENT OBJECTIVE, FINANCIAL SITUATION, SUITABILITY, OR THE PARTICULAR NEED OF ANY SPECIFIC PERSON WHO MAY RECEIVE THIS PRESENTATION, AND SHOULD NOT BE TAKEN AS ADVICE ON THE MERIT