Bob Evans Sells Restaurant Division

Jan 26, 2017, 00:32

Gadfly's Tara Lachapelle noted that the sale of Bob Evans' restaurant chain follows an activist campaign by Sandell Asset Management, which has been pushing the company to rid its namesake restaurant chain so it can focus exclusively on its more lucrative packaged-food business.

Bob Evans Restaurants is selling its restaurant business.

"The board of directors has consistently evaluated all options for creating shareholder value", said Doug Benham, executive chairman of Bob Evans Farms. But BEF Foods is growing, while sales at the restaurants are shrinking, a trend that has hurt many casual-dining operators. "The new Bob Evans, further strengthened by the manufacturing and intellectual capital of (Pineland Farms Potato Co.), is positioned to be a higher profit and higher growth company that is expected to provide better returns to shareholders and an enhanced product line for customers".

Golden Gate Capital has multiple investments in the food industry, including Red Lobster and On the Border Mexican Grill & Cantina.

"The steps we took today are the transformation of Bob Evans", said CEO Saed Mohseni in an interview.

The split was announced after the market close. Wall Street is expecting earnings per share of $2.26 for the year.

As recently as August, Sandell was jumping on Bob Evans earnings calls to continue to press his case.

At the time, Sandell compared Bob Evans to Cracker Barrel Country Store, arguing investors place a premium on packaged foods businesses, particularly those with a strong brand.

While shares of Bob Evans are up in Wednesday trading activity, they are still well short of Sandell's original $84 per share vision. This will result in the special dividend being $7.50 per share.

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