The shares of Darden Restaurants (NYSE:DRI) are trading lower today following the announcement of the resignation of Jeffrey Smith as Chairman of the Board of Directors of the company and fourth-quarter guidance.
Smith is the head of Starboard Value, the activist hedge fund that led the ouster of the company’s Board. Darden Restaurants is the owner and operator of Olive Garden, Longhorn Steakhouse, Bahama Breeze, Season 52, The Capital Grille, Eddie V’s and Yard House.
Since Smith took over as Chairman of Darden Restaurants in October 2014, the stock price of the company gained almost 60%. Today, the stock dropped 3.58% to $64.93 per share at the time of this writing around 12:58 in the afternoon in New York.
Darden Restaurants Board appoints Charles Sonsteby as Chairman
The Board of Directors of Darden Restaurants unanimously elected Charles (Chuck) Sonsteby to replace Smith as Chairman.
Prior to his appointment, Sonsteby was an independent director of Darden Restaurants and served as Chairman of the company’s Nominating and Governance Committee.
Sonsteby is the current Chief Administrative Officer and CFO of The Michaels Companies. He previously served as Executive Vice President and CEO of Brinker International.
“I am humbled by the opportunity to chair the Board of Directors of this great company. I look forward to leading this strong Board of talented directors and partnering with Gene and his team to continue to deliver value for all of our stakeholders,” said Sonsteby.
Smith is moving on with other projects
“I will thoroughly miss working with the capable and talented people throughout the company, and I am so incredibly proud of what we have been able to accomplish together. I am able to move on to other projects at this time because of the outstanding chemistry and capabilities of both the Board and management,” said Smith.
Smith also expressed his full confidence in the leadership and execution of Darden Restaurants’ CEO Eugene Lee, Jr. He also believed that Sonsteby would be an outstanding Chairman.
Starboard Value is now focused on Yahoo! Inc. (NASDAQ:YHOO). The activist hedge fund recently launched a proxy fight to replace the entire Board of the technology company because of its failure to achieve growth and profitability.
BTIG analyst Peter Saleh commented, “The reason Smith became chairman was to improve operations and most importantly to separate the real estate from the business. Now that Darden has completed this, he is moving on to other companies.”
On the other hand, Stephen Anderson, an analyst at Maxim Group said the stock price of Darden Restaurants declined due to its disappointing fourth-quarter forecast and not because investors lost confidence in the company due to Smith’s departure.