NEW ALBANY, Ohio
April 24, 2014
/PRNewswire/ -- Bob Evans Farms, Inc. (NASDAQ: BOBE) ("the Company") today confirmed receipt of notice of nominations from Sandell Asset Management ("Sandell") for candidates to stand for election to the Company's Board of Directors. The Company's Board of Directors will carefully consider and evaluate Sandell's notice and nominations and will communicate with the Company's shareholders in due course.
As the Company has previously communicated in conference calls with analysts and investors, as well as in its
December 9, 2013
, press release, and in direct discussions with Mr. Sandell and his colleagues, the Company's Board, with assistance from its independent financial advisor, Lazard, has thoroughly vetted the suggestions it has received over the past months from Sandell. The Board unanimously concluded that Sandell's recommended steps are
in the best interests of the Company and its shareholders. Specifically, with regard to the three key elements of the proposal that Mr. Sandell has made, the Company noted that:
Owning real estate puts the Company in a better position to borrow on attractive terms both now and in the future. Any 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:
- Significantly reduce the flexibility the Company now has to remodel its restaurants and make operational decisions relating to the closing of underperforming restaurants, a key factor in the historical and long-term success of the restaurant business;
- Be one of the most expensive forms of financing it could take on relative to available debt financing that the Company's strong balance sheet allows it to access; and
- Impose large permanent cash lease expense obligations, subject to annual increases, that would reduce future cash flow and financial flexibility.
Growing Bob Evans Farms Foods (BEF) will create more value than selling it or spinning it off at this time. In this regard, the Company noted that:
- After recently investing more than $100 million in an acquisition and plant expansions, BEF is on track to deliver 250 basis points of margin expansion during fiscal year 2015, and on a clear path to achieving 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
- BEF offers significant synergies with the Company's restaurant business, and the Company expects to realize these benefits more fully with completion of the integration of Kettle Creations, and from continued 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.