January 24, 2014
The second activist shareholder in two weeks to sue Bob Evans Farms and its directors contends that they improperly stripped shareholders of their right to change the company’s bylaws with a simple majority vote.
In its lawsuit, the Oklahoma Firefighters Pension & Retirement System pointed to unexplained changes by the company’s directors in late 2011 that make it extremely difficult for shareholders to change company bylaws, including one governing the election of directors.
“This class action arises because Bob Evans’ insular board of directors rewrote the company’s director-election rules in order to deprive public shareholders of their fundamental franchise rights,” the retirement system says in its lawsuit, filed in Chancery Court in the state of Delaware on Wednesday.
In November 2011, the board changed the shareholder vote required to amend the company’s bylaws to 80 percent. Just three months earlier, shareholders had approved a move to a simple majority, or more than 50 percent.
A spokesman for the retirement system was not available for comment yesterday.
Scott Taggart, Bob Evans’ vice president of investor relations, declined to comment on the lawsuit yesterday.
Also mum was a spokesman for Sandell Asset Management, the activist hedge-fund manager that sued Bob Evans last week for the same reasons. The Sandell spokesman did say, however, that the firm had no relationship with the retirement system before the system’s lawsuit.
Sandell, which owns 6.5 percent of Bob Evans’ shares, has been working since July to change business operations at the company, including selling and leasing back its restaurant properties, and selling or spinning off its growing food-service business.
Late last year, Sandell hired proxy-solicitation firm MacKenzie Partners to review options for maximizing the value of its Bob Evans shares because the company had failed to act on its suggestions.
Last week, Sandell said it would seek to expand Bob Evans’ board, which is limited to 12 members — only 10 of the seats are filled — and to fill vacancies “with new directors who are more focused on delivering value to the shareholders, who are the true owners of Bob Evans.”
Both the asset manager and the retirement system allege too-cozy relationships among CEO Steve Davis and several of the company’s directors. The retirement system documents many of those relationships, many of them through Ohio State University.