Investor sues to spur changes at Bob Evans

Firm went public with suggestion to split up restaurant and food-service businesses.
MCT Regional News
Jan 16, 2014

An activist Bob Evans Farms investor has sued the company to try to make it easier for shareholders to effect changes.

New York hedge fund Sandell Asset Management, which owns 6.5 percent of the New Albany company’s stock, asked the Chancery Court in the state of Delaware yesterday to lower the shareholder vote required to change Bob Evans’ bylaws to a simple majority — more than 50 percent.

Sandell plans to ask shareholders to expand the size of Bob Evans’ board, which is limited to 12 members — only 10 of the seats are filled — and to fill vacancies “with new directors who are more focused on delivering value to the shareholders, who are the true owners of Bob Evans,” the asset manager said in a statement.

“We have become convinced that dramatic governance change is necessary to rein in what we believe are the irresponsible spending habits and poor decisions made by (Steven) Davis, the company’s chairman and CEO,” said Thomas Sandell, CEO of the asset manager, in the statement.

A Bob Evans spokeswoman said that the company is reviewing Sandell’s complaint. “ We take corporate governance and shareholder views seriously and will respond in due course,” said Margaret Standing in an email.

Eleanor Bloxham, a corporate-governance expert in Westerville, said many companies are moving away from requiring shareholders to approve changes with a supermajority vote of 80 percent.

“That is the trend today,” Bloxham.

In September, Sandell’s firm went public with its suggestions to split up Bob Evans’ restaurant and food-service businesses, sell and lease back its substantial real-estate holdings, and use proceeds from the sales to repurchase a large amount of stock at a premium to “unlock shareholder value.”

A month later, Sandell said it had hired proxy-solicitation firm MacKenzie Partners to review options — including a proxy fight — for maximizing the value of its Bob Evans shares because the company had failed to act on its suggestions.

In December, Davis, CEO of Bob Evans, said his directors and advisers had analyzed Sandell’s suggestions but dismissed them because they would increase his company’s costs and reduce its cash flow, profit and flexibility to pay for future growth.

Now, Sandell contends that some Bob Evans directors have been on the board too long and are too close to Davis and to one another to make independent decisions. Enlarging the company’s board could accommodate directors who agree with Sandell, a move often made by activist shareholders.

As early as 2006, some Bob Evans shareholders wanted to re-elect the company’s directors every year; that is often an effort to elect directors with fresh points of view. These shareholders “ were looking for more ability to influence governance at the company,” said corporate-governance expert Bloxham.

Although Bob Evans didn’t support such a move in 2006, the company itself proposed the annual election of directors in 2007, 2009 and 2010. Shareholders did not approve the proposal until 2011, when they also approved lowering the required share of the vote to make certain bylaws changes to 50 percent.

Sandell contends that Bob Evans directors acted to “strip shareholders of their rights” by returning the vote requirement to 80 percent three months later.

“It does look like a defensive move on the part of the company,” Bloxham said.

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By Mary Vanac - The Columbus Dispatch, Ohio (MCT)

©2014 The Columbus Dispatch (Columbus, Ohio)

Visit The Columbus Dispatch (Columbus, Ohio) at www.dispatch.com

Distributed by MCT Information Services

Comments

voicetress

I don't care what they do to Bob Evans I still won't eat there anymore. Frost bit food, small portions, and lousy service. This goes for Mansfield, Tiffin, and Norwalk three strikes your out.

observer1

I think you hit the nail on the head. Instead of one-time actions to temporarily give the stock a bump, they need to refocus on the product. Ultimately that is the only way to "unlock shareholder value" long term.

buckeye15

They can focus all they want on the product but it will never get me in to one of their restaurants again. I used to love Bob Evans...good food and I was supporting a home grown Ohio business.

Then soon after Kasich took office, Bob Evans bribed him and told him they were going to move out of state, so Kasich gave them $8 million of your tax dollars to move from the south side of Columbus to the north side (New Albany). Then in 2012 they moved 100 jobs to Texas..so much for loyalty to Ohio. If they won't be loyal to Ohio, I won't be loyal to them.

Contango

Re: "Bob Evans bribed him,"

The term is: blackmailed or threatened.

BE IS a national co. ya know.

Haven't seen a BE, in TX, but I understand that they are planning on opening locations. Hopefully it will be good for corp. profits and investors.

BTW:

"The Columbus-based restaurant and food-production company is closing its Richardson, Texas, plant, transferring some sausage production from there to its plant in Xenia and investing millions in the Ohio plant through April 2015.

Bob Evans plans to spend a total of $14 million to equip its sausage plants in Xenia and Hillsdale, Mich., to absorb the Texas plant’s production, according to a regulatory filing."

http://www.dispatch.com/content/...

I own the stock indirectly. Reads like positive plan to create additional value.

We enjoy the meals, the wait staff and the atmosphere.

buckeye15

How do you know a bribe wasn't involved as well? I will take this one...you don't.

But seriously, thank you for the information about them bringing the jobs back from Texas. I will open my position up for reevaluation.

Contango

Re: "How do you know a bribe wasn't involved as well?"

Your accusation, no proof.

High tax IL is infamous for corps. threatening to pull out - nuthin' new here.

http://www.reuters.com/article/2...

According to CNBC: #2 State for biz? TX. OH #28.

Can't see WHY they'd wanna leave. :)

http://www.cnbc.com/id/100824779

End state corp. & individual income tax and watch the dynamic change.

buckeye15

If things were so peachy in Texas, they would leave the jobs down there, instead of bringing them back to Ohio. There is always more to it than what you portray.

JACKEL

Wow,I never had a bad meal there. We go at least once a week.

Really are you ...

Are they going to add a secluded make out parking lot?