Investor asks for sale of BEF Foods

by Erica Shaffer
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Sandell Asset Management is urging Bob Evans to sell its food processing unit, BEF Foods.

NEW YORK — Sandell Asset Management, one of the largest shareholders of Bob Evans, continues to push for a sale of the restaurant chain’s BEF Foods unit. In a letter to the Bob Evans board of directors, Sandell said the company could fetch more than $950 million for the food processing business.

Sandell argued that BEF Foods may generate approximately $68 million in EBITDA this year after the allocation of what Sandell said may be about $15 million of corporate overhead.

“Thus, BEF Foods may generate approximately $83 million in EBITDA before the allocation of corporate overhead, a figure much more relevant to a strategic industry participant,” Sandell said in the letter. “Based on that amount, we believe that the value that a strategic buyer could ascribe to BEF Foods may greatly exceed the entire market value of Bob Evans, which at an approximate stock price of $40 per share is about $855 million.”

Additionally, Sandell claims that Post Holdings has expressed interest in buying BEF Foods.

“…we have been told by knowledgeable sources that Post had expressed an interest in pursuing a transaction with Bob Evans involving its packaged foods business, BEF Foods, within the last year,” the letter stated. “Furthermore, we understand that Post has a continuing, strong interest in pursuing a transaction with Bob Evans involving BEF Foods, and has the ability to creatively structure a transaction in a manner that could reduce or eliminate the tax consequences to Bob Evans.

“It continues to be our strong contention that the intrinsic value of Bob Evans is far greater than the value implied by its current stock price and, given the dramatic uptick in valuations in the packaged foods space, we believe that the ultimate separation of BEF Foods and/or Bob Evans Restaurants would serve to narrow what we believe is this draconian discount to intrinsic value. We therefore believe that now is the time for the entire board of directors to take prompt action to address this issue.”

BEF Foods reported double-digit volume gains for the second quarter. Operating income surged 120% to $13,997,000. Net sales for the segment advanced 2.3% to $94,280,000.

Sandell Asset Management has led the push to sell BEF Foods since September 2013. The campaign led to a proxy fight that resulted in the resignation of then-chief executive officer Steve Davis in December and the addition of four nominees getting elected to the company’s 12-member board.
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