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NY Hedge Fund Calls for Restaurant Conglomerate to Break Up

Dec 17, 2013
Jing Chen

New York-based hedge fund firm Barington Capital Group is pushing for Darden Restaurants to break up in an effort to increase shareholder value.

In a 85-page presentation released Tuesday, Barington wants the conglomerate to divide its eight brands into two companies and focus on the different needs of each group. 

Barington stated in the presentation that one group should contain its mature restaurants, including Olive Garden and Red Lobster; the other should hold smaller, faster-growing franchises like Capital Grille and LongHorn Steakhouse. The mature-brand company would focus on paying high dividends, while the other entity would focus on higher stock growth.

The hedge fund also explained that Darden should spin off its real estate business, worth an estimated $4 billion, into a  publicly traded investment trust. Barington estimated that the changes could increase Darden's stock price to as much as $80 a share from $46 a share.

An activist hedge fund, Barington was founded by industry veteran James A. Mitarotonda.

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