Darden Restaurants Gains as Activist Hires Former Olive Garden President

By Jacqueline Doherty

Shares of Darden Restaurants (DRI) are up 2.80% to $50.33 today potentially on news that the former president of Olive Garden has been retained by activist shareholder Starboard Value, which has a 5.5% stake in Darden, the restaurant conglomerate that owns Red Lobster and Olive Garden.

Bradley Blum, the former president of Olive Garden and former CEO of Burger King (BKW), was retained as an advisor to Starboard in return for a $50,000 fee, which he will use to purchase shares of Darden, according to a Securities and Exchange Commission filing. Blum is currently the owner of BLUM Enterprises, described in the filing as a progressive restaurant company focused on creating and operating new restaurant brands.

Starboard asked Darden earlier this year to delay its planned spinoff of Red Lobster and look at other options to increase the value of the company. Shares may be up on speculation that Starboard could put Blum forward as a board member if a proxy battle occurs.

"I have known Brad since his days at Olive Garden.  In all my conversations about DRI I have made no secret of the fact that I consider Brad uniquely qualified to head up a restructuring and turnaround at the company.  I believe his expertise and experience make him an extremely valuable asset," wrote Howard Penney, an analyst with Hedgeye Risk Management in reaction to the SEC filing. Over the past year Penney has often written that Darden is worth substantially more than its stock price and requires new management.

Starboard may be replicating the path it took when investing in Office Depot. In November 2012 Starboard hired Joseph Vassalluzzo, a former Staples executive, and Robert Nardelli, former CEO of Home Depot and Chrysler, as advisors for their insight on how Office Depot could improve operations and strategy. Starboard had a 14.8% stake in Office Depot.  Both men were subsequently part of the four directors Starboard proposed for Office Depot's board in June 2013.  Two months later Office Depot and Starboard struck a deal that allowed Starboard to appoint three new directors, including Vassalluzzo.

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Calls to Starboard, Darden and Blum were not returned immediately.