Bob Evans Spinoff: Here’s What Tom Sandell Wants To Happen

Bob Evans spinoff: Bob Evans Farms Inc (NASDAQ:BOBE) is a company whose stake has recently been increased in the equity portfolio of Tom Sandell’s hedge fund, Sandell Asset Management. As follows, Sandell today disclosed ownership of 1.4 million shares of Bob Evans, which is equivalent to 5.1% of the company. At the current price of Bob Evans’ stock, the value of Sandell’s stake amounts to over $81.8 million. Also, Sandell said that it considers the company undervalued and proposed some measures to increase Bob Evans’ value, one of which is a spinoff of the company’s food products segment.

According to Sandell, “The Company suffers from a conglomerate discount, as it has two business segments: (1) a family-dining restaurant business, Bob Evans Restaurants, and (2) a packaged foods business, BEF Foods, and trades at a discount to other family-dining restaurant companies and packaged foods companies.

“The Company’s stock price does not reflect the significant real estate value of the Company’s 482 wholly-owned restaurant properties.

“The Company’s stock price has significantly under-performed other publicly-traded family-dining restaurant peers over the last 3-year and 5-year time periods,” the hedge fund said in an attachment to the filings.

In order to increase the value of the company, the hedge fund proposed three steps, the first being the detachment of the food products business via a sale or a spinoff. The other two steps involve unlocking of “the substantial real estate value embedded in its many owned restaurant properties through a sale-leaseback transaction,” and initiating a big self-tender.

The implementation of these steps could bring Bob Evans around $1.1 billion, two-thirds of which could be used for a buyback of Bob Evans’ shares at a price of $58 apiece. “A potential post-tender stock price of between approximately $73 per share and $84 per share, or an average price of $78.50 per share, could be justified,” Sandell also said. Shares are up 2.5% today and trade near $58.40 as of this writing. Check back here for more info on a potential Bob Evans spinoff.

Check out Sandell’s full letter to Bob Evans’ management below:

EX-99, Sandell-Bob Evans Farms

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