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Have you actually read the article ? It tells a different story: They wanted Darden to liquidate all of Olive Garden's real-estate holdings and declare a one-o
by fasteo 2y ago
Have you actually read the article ? It tells a different story:
They wanted Darden to liquidate all of Olive Garden's real-estate holdings and declare a one-off dividend that would net investors a billion dollars, while literally yanking the floor out from beneath Olive Garden, converting it from owner to tenant, subject to rent-shocks and other nasty surprises.
They wanted to asset-strip the company, in other words ("asset strip" is what they call it in hedge-fund land; the mafia calls it a "bust-out," famous to anyone who watched the twenty-third episode of The Sopranos)
The giant slide-deck making fun of Olive Garden's food was just a PR campaign to help it sell the bust-out by creating a narrative that they were being activists* to save this badly managed disaster of a restaurant chain
- s1artibartfast 2y agoI think that is the point. That is considered mismanagement. If I'm using a gold as the foundation of a hotdog stand, someone will come along and say that the gold is mismanaged, and worth more as jewelry. They would be right!
- johngladtj 2y agoYes, I did. Sale-leasebacks are common and perfectly reasonable business strategies. Generally speaking lease liabilities have a lower cost of capital than other types of debt, so making such a deal can help the company. None of the decisions described in the post are either unusual or unreasonable from a management team trying to save a troubled company. They were just unsuccessful.
- fasteo 2y ago>>> from a management team trying to save a troubled company. They were just unsuccessful. My take is that they were not there to save the company, but to extract all its assets and let it go.
- johngladtj 2y agoSometimes that's the best option.
- rondini 2y agoFor who? Was that the best option for the employees who relied on the income? Or the customers who enjoyed the food? There are plenty of actions that are rational from an economics standpoint as long as you don't care about any of the externalities such as human dignity.
- johngladtj 2y agoEmployees have a contractual claim, one that is above shareholders and most other creditors, nothing more nothing less. By all accounts they are being made whole, and can go off and get another job. Employees have no more of a right to sell their labor to red lobster than any other of their suppliers has a right to sell their products. Ultimately a company exists, and should exist, solely for it's shareholders. Anything else leads to waste, grift and mismanagement.