Bob Evans board might be in for proxy fight from activist shareholder

Staff Writer
Columbus CEO

An activist hedge-fund manager may be preparing a proxy fight at Bob Evans Farms.

New York-based Sandell Asset Management said yesterday that it has hired the proxy-solicitation firm MacKenzie Partners to review options — including a proxy fight — for maximizing the value of its 1.4 million Bob Evans shares because that company has failed to act on suggestions the investor began making in July.

In its latest letter, Sandell accused Bob Evans of waiting too long to sell Mimi’s Cafe, the company it bought in 2004 for $182 million in cash and debt, and sold in January for $70 million in cash and debt.

“Given the board’s dubious history of inaction, we have retained a proxy-solicitation firm to provide advice regarding the options available to us as we evaluate taking more affirmative steps to protect and enhance the value of our investment,” the firm’s CEO, Thomas Sandell, said in a letter to Bob Evans directors.

In September, the Sandell firm made public its desire that Bob Evans split its restaurant and food-service businesses, and sell and lease back its 425 restaurants, using some of the proceeds to buy back shares from existing shareholders — namely, Sandell — at a premium.

The success of both the business split and real-estate sales would be subject to timing, said Dennis Lombardi, executive vice president of food-service strategies at WD Partners, a restaurant-consulting firm in Columbus.

“A lot of this is a timing question around taking value out of a company and converting it to cash and distributing it to shareholders,” Lombardi said, speaking in general terms because Bob Evans is a client of his firm.

“In almost every single case that I can think of, the activist shareholder wants to do that now, and the company is saying, ‘Wait a minute. We’re not sure that’s the right long-term strategy for all of our shareholders,’ ” Lombardi said.

Bob Evans declined to comment on yesterday’s announcement from Sandell. In September, Scott Taggart, the company’s vice president of investor relations, said his company welcomed hearing about shareholder concerns and suggestions.

The New Albany-based food-service and restaurant company is not alone. Also in September, the activist hedge fund Barington Capital called for breaking up restaurant chain owner Darden into as many as three companies.

Meanwhile, activist shareholder Sardar Biglari has been trying for two years to gain board seats at Cracker Barrel to change the course of that company.

Sandell contends that Bob Evans could free $720 million by selling and leasing back its 482 restaurants and an additional $100 million by selling a 20 percent equity stake in its food-processing business in preparation for spinning off that business as a separate company.

That money could be used to buy shares from Sandell and other big shareholders.

But in its latest letter to Bob Evans directors, Sandell said neither the company’s board nor its management has seriously considered or taken action on the asset manager’s suggestions.

“While we found our most recent discussion with (chief executives) on Oct. 11 to be quite cordial, we are profoundly concerned by the board’s lethargic approach to taking action to enhance shareholder value,” Sandell said.

Bob Evans shares rose about 1 percent yesterday, to $54.29.


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