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Activist Investor Wants Red Lobster Spinoff Plan Put To Vote: WSJ

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Pedestrians pass a Red Lobster restaurant in Times Square, New York, U.S., on Tuesday, March 23, 2010. Darden Restaurants Inc., the owner of casual dining chains including Red Lobster and the Olive Garden, is scheduled to announce quarterly earnings tomorrow after the U.S. market close. Photographer: Jonathan Fickies/Bloomberg via Getty Images | Getty

Feb 24 (Reuters) - Activist hedge fund Starboard Value LP wants to put to shareholder vote Darden Restaurants Inc's plan to spin off its Red Lobster chain, the Wall Street Journal reported, citing a letter Starboard plans to send to shareholders on Monday.

In December, Darden said it would spin off or sell the floundering Red Lobster chain, bowing to pressure from hedge fund Barington Capital Group that said the largest U.S. full-service restaurant operator has become too large and complex to compete with direct rivals.

Starboard Value, which owns a 5.5 percent stake in the company, has been urging Darden to delay plans to spin off of its struggling Red Lobster chain.

Starboard, must win the support of more than 50 percent of the shareholders in the next 60 days to hold the special meeting, the Journal said. ()

If the special meeting happens, Starboard would ask shareholders to vote on a non-binding proposal urging Darden not to approve any Red Lobster plan without a shareholder vote, the newspaper said.

Starboard decided to call for the special meeting in what is known as a "consent solicitation", which activist investors have used in recent years to attempt to replace board members and push corporate change, the newspaper said.

In his letter to Darden last month, Starboard Value Managing Member Jeffrey Smith called Darden's Red Lobster proposal "a hurried, reactive attempt, in the face of shareholder pressure to do the bare minimum to appease shareholders."

Smith called on Darden to consider other options to boost share value, including slashing operating costs, improving restaurant results and divesting real estate.

Starboard and Darden could not be immediately reached for comment by Reuters outside of regular business hours.

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