The Morning Brief: Starboard Value Turns Up the Heat on Darden Again

Jeffrey Smith’s Starboard Value, which owns 5.5 percent of Darden Restaurants, is once again turning up the heat on the restaurant company. In a regulatory filing, the activist fund delivered a letter to Darden’s board of directors urging them to schedule the special meeting that Starboard has been requesting, at which Smith and other shareholders would express their opposition to the company’s proposed separation of Red Lobster. “Your continued failure to schedule the Special Meeting in a timely manner will leave us and your shareholders no choice but to conclude that it is your willful intent to delay the Special Meeting and disenfranchise the shareholders you were elected to represent,” says Smith, in the letter. “The Board’s continued attempt to delay the special meeting is a clear sign that this Board does not take its obligations to its shareholders seriously, and that substantial change to the Board may be necessary.”

Mark Rachesky, who co-founded MHR Fund Management in New York in 1996, is looking to raise as much as $3.5 billion for MHR Institutional Partners IV., a private equity fund that will take controlling stakes in middle-market companies, according to Bloomberg. Rachesky worked for Carl Icahn for six years before starting MHR, which currently has more than $5 billion in assets. According to Bloomberg, MHR looks to buy companies with hard assets such as satellites, trucks and films. It owns the largest stake in Loral Space & Communications, a company that is in discussions about selling its satellite operator Telesat Holdings.

The Securities and Exchange Commission announced civil fraud charges and an asset freeze against New York-based Aphelion Fund Management and two of its executives for distributing doctored performance figures to prospective investors in two hedge funds. The regulator alleges that Aphelion’s chief investment officer Vineet Kalucha fraudulently altered an outside audit firm’s report, changing an investment loss into a major gain in an account he managed. Aphelion’s chief financial officer, George Palathinkal, learned of this action but still went ahead with distributing the erroneous reports to prospective investors, the regulator alleges. The SEC also claims that investors were separately provided false information about Aphelion’s assets under management and Kalucha’s litigation history.
Kalucha, the majority owner and managing partner of the firm, faces additional charges of siphoning investor proceeds for his luxury car payments and settlements of legal actions against him personally that are unrelated to Aphelion. The SEC says that in response to its request for emergency relief for investors, U.S. District Court Judge Jed S. Rakoff issued a temporary restraining order, imposed an asset freeze to protect client assets, and temporarily prohibited the two executives from soliciting new investors or additional money from existing investors. The two hedge funds in question are the Aphelion US Fund and the Aphelion Offshore Fund. According to the regulator, the outside auditor’s report showed an investment loss of more than 3 percent during a 15-month period in an account that Kalucha managed. However, the fraudulent report distributed to investors showed a 30 percent gain during an 18-month period. In addition, the SEC alleges that Aphelion, Kalucha, and Palathinkal misled investors by noting that during 2013 Aphielion had $15 million or more in assets under management when the firm never had more than $5 million at any point during that year.

Wednesday was a big day for Nelson Peltz’s Trian Partners. Shares of Monzelez International, one of the fund’s core holdings, surged more than 8 percent after the company agreed to merge its coffee operation with D.E Master Blenders 1753 B.V. to create a pure-play coffee giant. Under the deal, Mondelez will receive $5 billion in cash and a 49 percent ownership stake in the new company, which will be called Jacobs Douwe Egberts, based in the Netherlands. At the same time, Monzelez announced a $3.5 billion restructuring program through 2018, which will consist of $2.5 billion in cash costs and $1 billion in non-cash costs. The restructuring program is intended primarily to cover severance as well as asset disposals and other manufacturing-related one-time costs, according to the company’s announcement.


Sir Michael Hintze and his wife, Lady Hintze, announced they have given £5 million ($8.48 million) to the Natural History Museum in London through the Hintze Family Charitable Foundation. Hintze, the founder, chief executive and senior investment officer of London-based CQS, just missed qualifying for Alpha’s Rich List this year. He earned $290 million in 2013, which landed him at the top of the Second Team.

Shares of Keurig Green Mountain, a high-profile short of David Einhorn’s Greenlight Capital, surged more than 7 percent in after-hours trading, following the company’s report of better-than-expected quarterly results. The stock had closed at $92.21 in the regular session on Wednesday, down 3.21 percent. The board of directors also authorized an additional $1 billion share buyback.

Shares of Tesla Motors, on the other hand, sank more than 5 percent in after-hours trading, even though the electric car maker’s quarterly earnings beat forecasts.