By Yashaswini Swamynathan
(Reuters) - Olive Garden owner Darden Restaurants Inc's (N:DRI) chairman, Jeffrey Smith, head of Starboard Value LP, has resigned 18 months after engineering the ouster of the company's board.
Darden's shares, which have risen nearly 60 percent since Smith took over as chairman in October 2014, fell 3.4 percent at $65.03 in morning trading on Tuesday.
"I am able to move on to other projects at this time because of the outstanding chemistry and capabilities of both the board and management," said Smith, whose investment firm is Darden's third-biggest shareholder.
Starboard has shifted its focus to Yahoo Inc (O:YHOO), looking to overthrow the Internet search company's board, including Chief Executive Marissa Mayer who has struggled to turn around the company.
The activist investor is also urging department store chain Macy's Inc (N:M) to enter into joint ventures for its stores, including the flagship Herald Square (NYSE:SQ) store in New York.
Starboard launched a public battle with Darden's management in 2014, including a 300-slide presentation calling on the company to cut executive pay, explore the sale of some real estate and fix its flagship Olive Garden chain.
The activist investor even criticized the pasta served at the Italian-themed Olive Garden, calling it generally overcooked and under-salted.
Starboard eventually won the proxy fight, overhauled the board and spun off some of Darden's real estate assets into a company called Four Corners Property Trust Inc REIT.
"The reason Smith became chairman was to ... improve operations and most importantly to separate the real estate from the business," said BTIG analyst Peter Saleh. "Now that Darden has completed this, he is moving on to other companies."
Smith will be replaced as chairman by Charles Sonsteby, an independent director on Darden's board and former CFO of restaurant chain Chili's owner Brinker International Inc . (N:EAT)
Olive Garden, Darden's biggest business by sales, has seen comparable restaurant sales pick up soon after Starboard replaced the board.
The company on Tuesday reported a 6.8 percent increase in same-restaurant sales at Olive Garden in its latest quarter ended Feb. 28. Analysts on average estimated a 5.6 percent rise, according to research firm Consensus Metrix.
Maxim Group analyst Stephen Anderson said the stock was down as the fourth-quarter forecast was disappointing and not because of a loss of confidence in Darden after Smith's departure.
Starboard has been reducing its stake in Darden and now owns 5.2 percent of the company.