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Darden up on report of hedge fund investment

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The Associated Press | October 9, 2013 04:24 PM EST | AP

Darden Restaurants Inc. shares jumped Wednesday on a report that a hedge fund bought a stake in Darden and is pushing to split up the restaurant company.

THE SPARK: The Wall Street Journal reported that Barington Capital Group LP has taken a 2.8 percent stake in Darden, the parent of Olive Garden, Red Lobster and other restaurant chains.

That stake would make Barington Darden's fifth-largest shareholder, according to FactSet.

The newspaper said, according to unnamed sources close to the matter, that Barington is pushing for Darden to form two separate companies.

A representative for Barington was not immediately available to comment.

THE BIG PICTURE: Darden, based in Orlando, Fla., operates more 2,100 restaurants across North America. It has struggled some with a slowdown as consumers have grown more selective about where they spend their money. For its fiscal first quarter ended Aug. 25, the company earned 53 cents a share, which was far short of the 70 cents per share analysts expected. Sales rose to $2.16 billion, helped by new locations. But that was still short of the $2.19 billion Wall Street expected.

Darden said in a statement that it "welcomes input toward the goal of enhancing shareholder value." As a policy, the company does not comment on specific talks with shareholders but confirmed it has a "dialogue" with Barington.

The company said its board will take the time necessary to evaluate the firm's suggestions, just as it would for any shareholder.

SHARE ACTION: Shares jumped $3.29, or more than 7 percent, to $49.57. Its shares have traded between $44.11 and $55.90 in the past 52 weeks.