Starboard succeeded not only in booting the former chief executive officer, the firm also replaced all of Darden’s 12-person board of directors, and Starboard’s CEO Jeffrey Smith became Darden’s independent, non-executive CEO. Smith had this to say about Lee’s appointment:
I have worked closely with Gene during his Interim CEO role and have been incredibly impressed by his clear thinking, openness to new ideas, passion for winning, and wonderful leadership style. Gene has already done a terrific job improving the energy and attitude inside Darden and we expect the reinvigorated culture to continue to improve. Gene brings the perfect combination of restaurant-level operating experience, brand- and corporate-level management expertise, and thoughtful, focused, hands-on leadership.
Lee joined Darden when the company acquired RARE Hospitality in 2007, where he was president and chief operating officer. The RARE acquisition also brought Longhorn Steakhouses under the Darden umbrella. The company also owns and operates Olive Garden and other restaurants.
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Darden’s big problem was its underperforming Red Lobster stores, and now they are gone. Starboard, among others, argued that the $2.1 billion sale price was too low. The company’s next big problem is Olive Garden, another full-service, casual dining restaurant in an environment that trended toward fast-casual stores like Chipotle Mexican Grill Inc. (NYSE: CMG) following the recession and has never looked back. If anything, the emergence of a subset of the fast-casual sector, the so-called fine casual stores like recently public Shake Shack Inc. (NYSE: SHAK), will put even more pressure on Olive Garden and its management.
Shares of Darden traded up about 0.2% early Monday, at $62.35 in a 52-week range of $43.56 to $62.69, a new 52-week high posted shortly after trading opened Monday. The stock’s $2.20 annual dividend now yields 3.6%, compared with a yield of 4.4% last June when the stock traded at around $48 a share.
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