NEW ALBANY, Ohio
Dec. 9, 2013
/PRNewswire/ -- Bob Evans Farms, Inc. (NASDAQ: BOBE) today responded to recent public comments by Sandell Asset Management ("Sandell").
Over the past few months, Bob Evans Farms Inc.'s ("the Company") senior management engaged in two discussions with Mr. Sandell, accompanied by a further telephonic meeting with Mr. Sandell and the Board's lead independent director. As discussed on those calls, and as communicated by the Company in its most recent quarterly conference call with investors and analysts, the Company's Board, with assistance from its independent financial advisors, Lazard, has thoroughly vetted the suggestions it has received from Sandell, and has unanimously concluded the recommended steps are not in the best interests of the Company and its shareholders.
Bob Evans Farms, Inc. Chairman and Chief Executive Officer,
Steven A. Davis
, stated that, "Although the three principal ideas offered by Sandell were not new to the Board's analysis and have been regularly considered as part of the Board's strategic deliberations, the Board conducted a fresh analysis of these matters in light of the discussions with Sandell. As a result of these deliberations, the Board believes that:
1) Owning our real estate puts us in a better position to borrow on attractive terms now, and in the future. The proposed sale and leaseback of the Company's real estate should be considered in the context of the Company's available financing strategies, and would:
- Be one of the most expensive forms of financing we could take on relative to other forms of debt that the strength of our balance sheet allows us to access;
- Significantly reduce the flexibility we now have to remodel our restaurants and make operational decisions relating to the closing of underperforming restaurants, a key factor in the historical and long-term success of our restaurant business; and,
- Impose large permanent cash lease expense obligations, subject to annual increases, that would reduce future cash flow and financial flexibility.
2) Growing Bob Evans Farms Foods, rather than selling it or spinning it off, will create significantly more value for shareholders, which is reconfirmed by our view that:
- After recently investing more than $100 million in an acquisition and plant expansions, that the business is on track to deliver 250 basis points of margin expansion during fiscal year 2015, and on a clear path to achieving our targeted 300‐350 basis point improvement by fiscal year 2018;
- A focus on "share of stomach," a model increasingly embraced by others in the restaurant industry offers significant opportunities for sales synergies, margin expansion, and brand enhancement; and
- Bob Evans Farms Foods offers significant synergies with our restaurant business, benefits we expect to realize more fully with completion of the integration of Kettle Creations, and from plant optimization.
- Either of the Sandell-suggested transactions carries the risk of incurring unnecessary costs and fees, and diverting Board, management, and employee focus away from core business operations over an extended time period.
3) With respect to capital deployment, the Company has a strong record and commitment of returning capital to shareholders. The Board expects to have returned over
to shareholders from the beginning of fiscal 2007 through the end of this fiscal year. It expanded the current fiscal year share repurchase program by
, for a total expected share repurchase of
this fiscal year, contributing to an approximate one-third reduction in share count since 2007.
Bob Evans Farms Inc. is always engaged with its shareholders and actively participates in discussions with current and potential investors. We appreciate, and benefit from the feedback these discussions provide. What we have heard from these discussions with many of our major shareholders is the importance of executing on our long-term 8 to 12 percent earnings growth guidance, thereby appropriately matching our capital funding and capital allocation strategies to support long-term growth in a sustainable manner. However, what we have not, and will not, undertake are financial engineering tactics that place our company's ability to deliver long-term shareholder value at unnecessary risk.