Bob Evans Farms, Inc. BOBE
Bob Evans trades at a conglomerate discount; spinning BEF Foods, monetizing 482 owned restaurants via sale-leaseback, and tendering at $58 unlocks ~$78.50/share.
Thesis
Bob Evans Farms is a two-segment business — 560 family-dining restaurants and BEF Foods packaged goods — trading at 8.7x FY2014E EBITDA, a steep discount to both 9.1x family-dining peers and 9.9x packaged-food peers. Sandell argues CEO/Chairman Steven A. Davis has presided over 3- and 5-year under-performance of up to 41% and 150% respectively, including the $133mm write-down on the Mimi's Café disposal, yet received a 4-year contract extension. The proposed three-step unlock spins or sells BEF Foods at ~11x EBITDA for $558mm, monetizes 482 owned restaurant properties via sale-leaseback at a 7% cap rate for $723mm, and deploys 75% of the combined $1.08bn into a self-tender at $58/share. Pro-forma valuation yields a price range of $73-$84/share, averaging $78.50, versus $57.03 today.
SCQA
Bob Evans Farms is a $1.3bn-revenue conglomerate pairing 560 family-dining restaurants with BEF Foods packaged goods, owning the real estate under 86% of its restaurants and trading at 8.7x FY2014E EBITDA.
The mixed business model creates a conglomerate discount, the stock has lagged peers by up to 41% over 3 years and 150% over 5 years, and CEO Steven Davis was extended despite the $133mm Mimi's Café write-down.
Separate BEF Foods via sale or spin-off, execute a sale-leaseback of the 482 owned restaurant properties, and deploy 75% of the $1.08bn proceeds into a self-tender at $58 per share.
Pro-forma valuation lands between $73 and $84 per share, averaging $78.50 — roughly 38% upside versus the $57.03 stock price as of 9/19/13, with further M&A optionality on the remaining pure-play restaurant company.
The three reasons
- 1
Conglomerate discount: restaurants + packaged foods trade below both peer groups
- 2
482 owned restaurant properties hide ~$723mm in real-estate value via sale-leaseback
- 3
3-step plan (spin BEF, sale-leaseback, self-tender) yields ~$78.50/share vs $57 today
Primary demands
- Separate BEF Foods packaged-foods business via sale or spin-off
- Execute a sale-leaseback of the 482 owned Bob Evans restaurant properties
- Use ~75% of the ~$1.08bn proceeds to fund a large self-tender at $58/share
- Address CEO/Chairman Steven A. Davis accountability after years of under-performance
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Precedents cited
- Ralcorp acquisition at 12.5x EBITDA
- Heinz acquisition at 14.3x EBITDA
- Ruby Tuesday sale-leaseback at ~6.25-6.7% cap rates
- Benihana, PF Chang's, O'Charley's and California Pizza Kitchen take-privates
Notable slides (6)
Notes
Initial public thesis from Sandell's Castlerigg Investments vehicle; 5.1% stake disclosed in the disclaimer. Classic three-step playbook: spin packaged-foods segment, sale-leaseback of restaurant real estate, self-tender. Cites equity-research anchors (CL King, Stephens) for the $800mm-$1bn real-estate value claim and Hillshire CFO commentary as M&A signaling. Villain framing is explicit: CEO Steven A. Davis named, 4-year contract extension flagged as reward-for-failure alongside the $133mm Mimi's Café loss. Deck is text- and table-heavy with minimal editorial craft; no cover-slide drama, no big headline visuals, but peer-gap Bloomberg charts and a sum-of-parts bridge do the argumentative work.