Orange County Business Journal

Yard House Parent Faces Pressures from Activist Shareholder

Kari Hamanaka Thursday, November 21, 2013

An activist shareholder is calling for restaurant operator Darden Restaurants Inc.—the parent of Irvine-based Yard House USA Inc.—to be split.

Orlando, Florida-based Darden owns multiple restaurant chains, including Red Lobster and Olive Garden.

It's been facing pressure from activist shareholder Barington Capital Group LP, a New York investment firm, which said it is leading a group of shareholders that have a more than 2% combined stake in the company.

Barington said Thursday it hired investment banking firm Houlihan Lokey and proxy services specialist MacKenzie Partners to conduct a review of its proposal for Darden.

Barington is calling for Darden to spin off Red Lobster and Olive Garden into a separate company, leaving Yard House, Capital Grille, Seasons 52 and other chains it sees as having strong growth prospects as part of another entity.

Red Lobster saw U.S. same-store sales fall 5.2% in the August quarter, while Olive Garden’s comparable sales fell 4%.

Darden reported a 37.6% decline in overall earnings during the August quarter to $70.3 million. Sales rose 6.1% to $2.03 billion, with the growth partially attributed to the addition of Yard House.

Darden paid $585 million for Yard House in July 2012.

Yard House now counts more than 40 restaurants in 17 states.

Darden shares closed up about 1% on Thursday to a market value of $7 billion.