Darden Restaurants CEO Otis Steps Down; Gene Lee Named Interim Replacement

(RTTNews) - Darden Restaurants Inc. (DRI) said Tuesday that Clarence Otis has stepped down as chief executive officer with immediate effect. He will be succeeded by Gene Lee, previously president and chief operating officer, as interim CEO.

The management changes comes just days after all twelve directors nominated by activist investor and Darden Restaurants' key shareholder, Starboard Value L.P., were elected to the restaurant chain operator's board.

The election of Starboard Value's nominees marks a victory for the hedge fund in its proxy battle with the full-service restaurants operator. Starboard Value, which has beneficial ownership of about 8.8 percent of Darden Restaurants' shares, had sought to replace the company's entire board with its own nominees.

Darden Restaurants said that its independent Inspector of Elections has certified the results of the company's 2014 annual meeting held last Friday.

Accordingly, Darden's shareholders have elected all twelve Starboard-nominated directors to Darden's Board. They new directors are Betsy Atkins, Margaret Shan Atkins, Jean Birch, Bradley Blum, Peter Feld, James Fogarty, Cynthia Jamison, William Lenehan, Lionel Nowell, III, Jeffrey Smith, Charles Sonsteby, and Alan Stillman.

The company's new board has appointed Starboard Value CEO Jeffrey Smith as independent non-executive chairman of the board.

In late July, Darden Restaurants had said that Clarence Otis would step down as chairman and CEO of the company by December 31, 2014.

Otis had joined Darden in 1995. He was appointed CEO of Darden in November 2004 and chairman of Darden's board in November 2005.

Commenting on Lee's appointment as interim CEO, Smith said, "Gene has proven to be an outstanding leader at Darden, and we are excited to work closely with him as our interim Chief Executive Officer. The Board's Search Committee will conduct a full search for the next CEO of Darden, which will include both internal and external candidates."

Further, Darden Restaurants announced the appointment of the board's committee chairs, effective immediately.

Cynthia Jamison will chair the audit committee, Jeffrey Smith will be chair of the CEO Search Committee and James Fogarty as chair of the Compensation Committee. In addition, William Lenehan has been appointed as chair of the Finance and Real Estate Committee and Betsy Atkins as chair of the Nominating and Governance Committee.

Last Friday, Darden Restaurants said that based on preliminary results, its shareholders elected all twelve directors nominated by Starboard Value to the company's board.

Starboard Value had released a detailed transformation plan for Darden Restaurants, including raising the EBITDA and calling for company-wide operational improvements.

The activist investor said in April that Darden's plan to spin off the Red Lobster chain was the wrong spin-off, at the wrong time, and for the wrong reasons.

The hedge fund's transformation plan for Darden Restaurants also envisaged company-wide operational improvements, a turnaround plan for the company's flagship Olive Garden chain, a value enhancing strategy for Darden's real estate assets, and a new franchising program.

Two proxy advisory firms, Institutional Shareholder Services or ISS and Glass Lewis & Co. LLC, had both recommended that Darden shareholders vote in favor of Starboard Value's twelve board nominees.

However, Darden Restaurants' board had warned shareholders that it would be appropriate to consider the independence and experience of all twelve of Starboard Value's director nominees, given their role in the hedge fund's efforts to take effective control of the company.

DRI is currently trading at $47.76, down $0.68 or 1.45 percent on a volume of 223,557 shares.