Sandell Asset Management Corp. (“Sandell”), the beneficial owner of approximately 1.4 million shares, or 5.1%, of Bob Evans Farms, Inc. (NASDAQ:BOBE) (“Bob Evans” or the “Company”), released a letter to the Company’s Board of Directors (the “Board”) indicating that Sandell has retained the proxy solicitation firm MacKenzie Partners, Inc. (“MacKenzie”). Sandell has retained MacKenzie to provide advice regarding options to protect and enhance the value of its investment, including a possible consent solicitation, in order to allow the shareholders, who are the true owners of Bob Evans, to seek change at the Company. Sandell cites the Board’s troubling history of inaction, as well as the Board’s current failure to promptly consider, let alone implement, any of the ideas previously suggested by Sandell to deliver increased shareholder value, as the reasons which impel Sandell to consider taking action.
Sandell’s letter, the full text of which is set forth below, advised the Board as to the following:
- Sandell has retained the proxy solicitation firm MacKenzie Partners, Inc. to provide advice regarding possible options available to it.
- Bob Evans is a Delaware corporation that does not prohibit shareholder action by written consent and, as such, one option Sandell intends to evaluate is the pursuit of a consent solicitation in order to allow the shareholders, who are the true owners of the Company, to seek change at Bob Evans.
- The Board’s current apathy is troubling and has historical precedent.
- Over three months have elapsed since Sandell made initial contact with the management of Bob Evans to discuss three broad ideas that could enhance shareholder value, and the Board has yet to give serious consideration, let alone take action, with respect to these ideas.
- As an example of how shareholders have suffered from the Board’s history of inaction, the Board had presided over persistent poor results at the Mimi’s Café restaurant chain for almost six years before finally taking action to sell Mimi’s at a $133 million loss in February 2013.
- Sandell has received separate unsolicited approaches from two separate, multi-billion dollar public real estate investment firms that would have a keen interest in pursuing a sale-leaseback transaction with Bob Evans. One of these firms in particular has tried on many occasions over the last several years to discuss a sale-leaseback with Bob Evans but has never received a reply from the Company.
- Given the many different alternatives available for the Company to consider, were the Board serious about enhancing shareholder value it would have formally retained a reputable investment banking firm to advise an independent committee of the Board and publicly-announced such action.
- Sandell reiterated its multi-step plan, which encompasses three broad ideas, to deliver increased value to the shareholders of Bob Evans:
- Step 1: Separate the food products business (BEF Foods) through a sale or an IPO of a 19.9% equity stake of BEF Foods as a pre-cursor to a subsequent spin-off or split-off.
- Step 2: Pursue a $400 million sale-leaseback transaction for approximately 56% of the Company’s owned restaurant real estate to be followed by further possible sale-leaseback transactions altogether totaling up to approximately $720 million.
- Step 3: Implement a large self-tender with some of the proceeds generated from Step 1, Step 2 and additional borrowings.
- Should the Company pursue Step 1, Step 2 and Step 3, a stock price of approximately $80 per share could be justified, with prospective total consideration of up to $90 per share, depending upon future sale-leaseback assumptions.
Full text of the letter follows:
“November 11, 2013