Today, according to [a New York Times article] (http://dealbook.nytimes.com/2013/10/16/an-activist-investor-is-urging-darden-to-break-itself-up/?ref=dardenrestaurantsaurants), Barington Capital has sent a letter to Darden Restaurants (DRI: NYSE) urging the board and CEO to breakup the company. (Darden runs Olive Garden, Red Lobster, LongHorn Steakhouse, The Capital Grille, Yard House, Bahama Breeze, Seasons 52, Eddie V's Prime Seafood, and Wildfish Seafood Grille. Source: NYTimes.) Although Darden's has stagnated as of late overall, it's trend over time is positive and it is certainly still within the higher end of its nearest competitors. Consider the following table:
| Darden | Bloomin' | Brinker Intl. | YUM! Brands, Inc. | Ignite Restaurant Group |
|---|---|---|---|---|
| P/E Ratio | 18.0x | 24.8x | 18.4x | 27.9x |
| EPS | $2.82 | $0.92 | $2.22 | $2.38 |
| Revenue | $8.7B | $4.1B | $2.8B | $13.1B |
| Profit Margin | 4.29% | 3.16% | 5.74% | 8.31% |
| Return on Equity | 18.91% | 49.46% | 71.14% | 50.42% |
| Share price | $50.66 | $22.70 | $40.84 | $66.46 |
* Source: NYTimes Company Information Sheets (http://topics.nytimes.com/top/news/business/companies/[[company name]]/index.html)
Although falling toward the rear of the pack in terms of Return on Equity, Darden's Profit Margin, EPS, and P/E Ratio are all relatively strong in comparison to their peers. Their stock price is strong. Why the action by Barington Capital to break-up what seems to be at least a relatively stable enterprise? According to Barington's website, they typically invest "in undervalued publicly traded companies that Barington believes could appreciate significantly in value as a result of a change in corporate strategy or various operational, financial or corporate governance improvements." ([www.barington.com] (http://www.barington.com))
Clearly, some analysts feel that Darden could be doing more to improve their position, value, and returns. Two points spring to mind:
- Representing roughly 2% of Darden ownership, if Barington wanted to really influence corporate decision-making, a stronger representation of shareholder sentiment/interest could have facilitated exactly that, and with a larger indication (say, 5-8%) going forward to the board and executive, perhaps action may have been quicker in coming.
- Although this action itself is, really, simply the beginning of a dialog, it still reflects a activist intent which is being conducted between a minority of shareholders a
$100 Darden Restaurant gift card is universal to/usable at Olive Garden, Bahama Breeze, Yard House, Cheddars, Longhorn Steakhouse and Seasons 52. I received it as a Christmas gift but I will honestly never use it and cash would be of way more use at the moment. Thank you!
Comment before Pm.
The year is 2035. RDV Sports Inc.’s lease of the Amway Center has ended. We’re not far removed from one of the prophecized “championships by 2030.” Lower bowl tickets come with complimentary all-you-can-eat soup, salad, and breadsticks. Life is good.
Valid for Olive Garden, Longhorn Steakhouse, and other Darden Restaurants.
Restaurants: Olive Garden, Longhorn Steakhouse, Cheddar's, Yard House, Bahama Breeze, Seasons 52.
