Comment by fasteo
2 years 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
Yes, 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.
>>> 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.
Sometimes that's the best option.
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I 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!