|Dear Fellow Bob Evans Shareholders:|
|As you may be aware, Sandell Asset Management (“Sandell”) is a significant shareholder of Bob Evans Farms, Inc. (“Bob Evans” or the “Company”), with beneficial ownership of approximately 6.5% of the Company. While we strongly believe that the inherent value of Bob Evans is far in excess of the Company’s current share price, we have serious doubts regarding management’s ability to realize this value, particularly in light of the Company’s abysmal financial results for the second quarter of Fiscal 2014.|
|Though we had hoped to reach an amicable resolution with Bob Evans that would have delivered substantial value to the shareholders and eliminated the need to embark on a costly and time-consuming public contest, we have been met with near indifference on the part of management and the Board of Directors (the “Board”) of the Company aside from some dismissive commentary provided by Chairman and CEO Steven Davis on the Company’s December 4 th earnings teleconference. Accordingly, we intend to commence a consent solicitation in order to empower shareholders to seek change at Bob Evans.|
|We have made repeated attempts to engage in a dialogue with the Company over a period of nearly five months for the sole purpose of discussing ideas which could deliver significant additional value to you, the true owners of Bob Evans. Unfortunately, management and the Board of Directors, aided by its financial advisors Lazard, have decided to take no action with respect to our ideas aimed at unlocking what we believe may exceed $80 per share of value associated with the Company’s unique assets, apparently choosing instead to pursue “business as usual,” despite the Company’s abysmal earnings performance and concomitant stock price decline.|
|Furthermore, in addition to the litany of impairment and other charges taken in the Company’s FY2014 second quarter, the financial results that Bob Evans recently reported paint a very troubling picture regarding not only the Company’s operating structure but the capital allocation decisions made by management. An increase in sow prices had a dramatic negative impact on the operating results of BEF Foods and was responsible for a staggering $0.23 per share reduction in the overall Company’s EPS, further illustrating the strategic irrationality of combining a restaurant business and a packaged foods business under one corporate umbrella.|
|With regards to the Company’s capital spending efforts, by our calculations, management will have spent close to $130 million on its Farm Fresh remodeling initiative by the end of FY2014; these Farm Fresh remodeled restaurants generated a -1.5% same store sales decline for the second quarter, dismal on its own and far below the Company’s family-dining peers who have not embarked on such an expensive undertaking (note: Cracker Barrel, Denny’s, and DineEquity (IHOP) generated +2.8%, +1.2%, and +3.6% comparable store restaurant sales increases, respectively, in their most recent fiscal quarters). This costly initiative and the Company’s recently-constructed $48 million corporate headquarters are but two examples depicting what we believe are the misguided spending priorities of Chairman and CEO Steven Davis. The fact that Mr. Davis and the Board continue to discuss the pursuit of additional acquisitions is truly frightening given the value that was destroyed with the acquisition of Mimi’s Café.|
|We have in fact become convinced that there has been a complete governance breakdown at Bob Evans, as in addition to the current problems plaguing the Company, we have recently learned of at least one private equity group which was said to have approached management with an acquisition proposal that was summarily dismissed by Chairman and CEO Steven Davis. He similarly turned a blind eye to potential value creation in ignoring the repeated approach from a multi-billion dollar real estate investment firm proposing a sale-leaseback transaction with the Company. That firm, in addition to a second multi-billion dollar real estate investment firm, continue to express to us a keen interest in pursuing a transaction with the Company.|
|This latest information adds to the numerous concerns that we have had for some time regarding what we believe are poor governance practices at Bob Evans, and we have made suggestions to the Board as recently as November 25 that it take appropriate steps to bring the Company’s corporate governance in line with what are considered best practices. Sadly, these constructive suggestions have been met with seeming disregard. We shareholders cannot afford to let this Board, with its history of inaction, continue to operate with sub-standard corporate governance policies, particularly given the capital that Chairman and CEO Steven Davis seems intent upon spending with no apparent return. As such, our consent solicitation will be aimed at swiftly empowering shareholders to seek change at the Company. Importantly, shareholders do not have to wait until the Company’s Annual Meeting to effect change, as they can take action by written consent.|
|In the future we intend to file a consent solicitation statement as well as additional soliciting materials and you may find further information discussing our views in our presentation entitled Unlocking Shareholder Value at Bob Evans (available at http://www.sandellmgmt.com/news/Unlocking_Bob_Evans_Value.pdf). We look forward to further communications with you in the future as we aim to empower all of the shareholders to seek change in the Company that they own.|
|Sandell Asset Management”|
Sandell To Commence Consent Solicitation At Bob Evans Farms, Inc.
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