Under pressure from an activist shareholder, Bob Evans Farms has announced it will sell and lease back some of its restaurant properties in a move to raise $165 million to $170 million to pay down debt and continue buying back shares.
New York hedge fund Sandell Asset Management holds about 9.6% of Bob Evans’ outstanding shares. After launching a proxy fight last year, it won a third of the 12 board slots.
Bob Evans, which runs 561 restaurants across the U.S., had previously said it intended to sell and lease back its headquarters in New Albany, Ohio, and facilities in Lima, Ohio, and Sulphur Springs, Texas. It expects net proceeds of $85 million to $90 million from that deal.
“We have completed our review of alternatives concerning a transaction for our owned restaurant properties and determined … that given our current business and market conditions, a sale-leaseback transaction of up to $200 million is the most appropriate path to further enhance shareholder value,” CFO Mark Hood said Tuesday in a news release.
“We would anticipate net proceeds of $165 to $170 million from such a transaction,” he added.
According to The Wall Street Journal, Bob Evans is still considering separating its prepared-food and restaurant businesses—a move which is supported by Thomas Sandell, a former Bear Stearns trader now at the helm of Sandell Asset Management. He has accused the company of a “woeful track record of underperformance.”
Sandell’s choices for the board include Douglas N. Benham, the former chief executive of the fast food chain Arby, who was elected last week to lead Bob Evans in a newly created executive chair position until a new chief executive is appointed. Longtime CEO Steve Davis resigned in December.
In first-quarter results reported Tuesday, Bob Evans said it made a profit of $4.3 million, or 19 cents a share, compared with a year-earlier loss of $1 million, or four cents a share.
The restaurant segment reported sales of $238.7 million, down 0.6% from the year earlier, while sales at established restaurants open for at least one and a half years declined 0.3%. Net sales at the prepared-foods business fell 3.7% to $83 million.