Bob Evans Farms Inc (BOBE): Tom Sandell Takes BEF Foods Separation Matter into His Hands

Tom Sandell‘s Sandell Asset Management, in a new filing with the SEC, disclosed some new details regarding its activist stake in Bob Evans Farms Inc (NASDAQ:BOBE). The investor said that it has been contacted by a private equity firm that might be interested in buing the company’s wholly-owned subsidiary BEF Foods. Tom Sandell owns around 2.17 million shares of Bob Evans, the activist stake being equal to 9.2% of the company’s common stock, up from approximately 2.08 million shares the fund disclosed in an earlier filing.

Thomas Sandell

In addition, Sandell revealed that several investment firms also approached it regarding some transactions involving Bob Evans Farms Inc (NASDAQ:BOBE)’ real estate. Therefore, Sandell said that it plans to engage in discussions with the company’s management and its Board of Directors and other shareholders regarding these deals.

In August, Sandell Asset Management, which with its stake is one of the largest shareholders of Bob Evans Farms Inc (NASDAQ:BOBE), won a proxy battle with the board of the company. Two independent proxy advisory firms, ISS and Glass Lewis, suggested shareholders to vote on the Gold proxy card to support the nomination of Sandell’s candidates to be elected to the company’s board of directors, reiterating that Bob Evans needs a shake up in order to provide more value to shareholders.

Sandell has been fighting the company’s management and board for a change for several months. The investor has been constantly trying to convince other investors that Bob Evans Farms Inc (NASDAQ:BOBE) requires another approach to its business model in order to correct the underperformance of the company’s stock. Sandell has even created a website,, which collects all the information on Sandell’s activist battle to pursue changes at the company.

The fund has added Bob Evans Farms Inc (NASDAQ:BOBE) to its equity portfolio during the second quarter of 2013, and went activist around a year ago, disclosing a letter send to the company’s board in which it had urged the board to spin-off and/or sale BEF Foods. Back then, the investor said that the spin-off of the subsidiary could bring an EBITDA multiple of 10.0x, while its sale could command and even higher EBITDA multiple.

Meanwhile, the stock of Bob Evans Farms Inc (NASDAQ:BOBE) has declined by 5% since the beginning of the year, and lost over 16% of its value over the past 52 weeks. The stock has declined more than some of its peers from the restaurant industry. For example, DineEquity Inc (NYSE:DIN) lost around 3% year-to-date, while BJ’s Restaurants, Inc. (NASDAQ:BJRI) gained 16%. Bob Evans has also underperformed the average industry return of around 1.40%. On the other hand, the packaged foods industry, where BEF Foods would be included, returned 9% year-to-date, which could also speak in favor of the spin-off of the subsidiary.

Amid Sandell’s activist moves to increase the shareholder value of Bob Evans, several passive investors among those that we track have been bullish on the company. Chuck Royce‘s Royce & Associates raised its stake by 4% during the second quarter to around 455,700 shares, while John W. Rogers‘ Ariel Investments increased its exposure by 5% during the same period and reported 228,500 shares. In addition, Israel Englander is also bullish on Bob Evans, adding the company to Millennium Management’s 13F portfolio and disclosing around 174,300 shares held as of the end of June.

Sandell’s activism in Bob Evans Farms has received the support of the Street even today. Right after the disclosure of the filing, the stock price of Bob Evans Farms spiked by around 3%.

Disclosure: none