Bob Evans Farms, Inc. Acknowledges Receipt Of Letter From Investor
Bob Evans Farms, Inc. (NASDAQ: BOBE) last week confirmed receipt of notice of nominations from Sandell Asset Management 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.
Bob Evans Farms, Inc. (NASDAQ: BOBE) last week confirmed receipt of notice of nominations from Sandell Asset Management 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 not 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:
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:
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.
With respect to capital deployment, the Company has a strong record and commitment of returning capital to shareholders:
The Board welcomes the views of its shareholders and fully considers suggestions such as those presented by Mr. Sandell. It will not, however, undertake financial engineering that would jeopardize the Company's ability to build long-term value.
About Bob Evans Farms, Inc.
Bob Evans Farms, Inc. owns and operates full-service restaurants under the Bob Evans Restaurants brand name. At the end of the third fiscal quarter (January 24, 2014), Bob Evans Restaurants owned and operated 562 family restaurants in 19 states, primarily in the Midwest, mid-Atlantic and Southeast regions of the United States. Bob Evans Farms, Inc., through its BEF Foods segment, is also a leading producer and distributor of refrigerated side dishes, pork sausage and a variety of refrigerated and frozen convenience food items under the Bob Evans and Owens brand names.
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 not 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.
With respect to capital deployment, the Company has a strong record and commitment of returning capital to shareholders:
- The Company expects to have returned over $800 million 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 $50 million, for a total share repurchase of $225 million this fiscal year, contributing to an approximate one-third reduction in share count since 2007; and
- The Company intends to target the return of additional cash to shareholders via an ongoing authorized $100 million share repurchase to keep the Company at an approximate 3.0 times leverage ratio. We announced this plan previously, and remain committed to it.
The Board welcomes the views of its shareholders and fully considers suggestions such as those presented by Mr. Sandell. It will not, however, undertake financial engineering that would jeopardize the Company's ability to build long-term value.
About Bob Evans Farms, Inc.
Bob Evans Farms, Inc. owns and operates full-service restaurants under the Bob Evans Restaurants brand name. At the end of the third fiscal quarter (January 24, 2014), Bob Evans Restaurants owned and operated 562 family restaurants in 19 states, primarily in the Midwest, mid-Atlantic and Southeast regions of the United States. Bob Evans Farms, Inc., through its BEF Foods segment, is also a leading producer and distributor of refrigerated side dishes, pork sausage and a variety of refrigerated and frozen convenience food items under the Bob Evans and Owens brand names.
