COLUMBUS, OHIO — Bob Evans Farms Inc. will close its sausage production plant in Richardson, Texas. The company cited record-high prices for sows as the reason for the closing.
“To allow BEF Foods to better manage production capacity within our foods business, we have closed our plant in Richardson, Texas, effective today,” said Mike Townsley, president of BEF Foods Inc. “This closure allows us to address continuing challenges in food production, particularly record-high prices for sows, and while these decisions are not easy, they are necessary.
“We are working to assist our employees through this difficult time, and we are grateful for their service to our company.”
The company has additional production plants in Xenia, Ohio and Hillsdale, Mich.
The announcement comes as a shareholder urges the company to split. Sandell Asset Management Corp., an investment firm with approximately 5.1% of the restaurant and food company’s shares, recommended in a Sept. 24 letter to Bob Evans’ board of directors three potential strategies for increasing shareholder value: spinning off the food business; unlocking the real estate value embedded in Bob Evans’ many owned restaurant properties through a sale-leaseback transaction; or implementing a large self-tender with most of the proceeds generated from the first two recommended strategies.
“We believe that Bob Evans suffers from a conglomerate discount as a result of the company’s two disparate business segments: a restaurant business, Bob Evans Restaurants, and a packaged foods business, BEF Foods,” wrote Thomas E Sandell, chief executive officer of the investment firm. “Due in part to this conglomerate structure, which has negatively impacted analyst coverage and ignores the different constituencies of restaurant and packaged foods investors, the company has traded at a perennial discount to its restaurant peers, and at an even greater discount to companies in the packaged foods space.
“Given this history, it is particularly concerning to us that management continues to proclaim the ‘corporate synergies’ and ‘cross-segment strategies’ between Bob Evans Restaurants and BEF Foods. The benefits of continued integration between these two businesses do not seem compelling and we believe that management may be touting these perceived benefits to justify the preservation of their ‘empire’ and their refusal to separate these two businesses. In addition, we believe that the market is not affording Bob Evans adequate value for its substantial real estate holdings, which include its 482 wholly-owned restaurant properties.”
Acknowledging receipt of the letter on Sept. 25, Bob Evans said, “We welcome our shareholders expressing their views to us, and we take into consideration their concerns and suggestions.”For the first quarter ended July 26, income for Bob Evans Farms declined 39% on impairment and restructuring costs. For the quarter ended July 26, the company had income of $9,153,000, equal to 33c per share on the common stock, which compared with $15,008,000, or 53c per share, during the same quarter of the previous year. Net sales were $329,449,000, up 2% from $323,441,000 during the same quarter of the previous year.