Bob Evans Farms, Inc.,
BOBE discussed today the clear choice about the future of the Company
to be faced by its stockholders at the Bob Evans 2014 Annual Meeting. In a
letter mailed to the Company's stockholders, Bob Evans Chairman and Chief
Executive Officer Steven Davis and Lead Independent Director Michael Gasser,
on behalf of the Board of Directors, urged stockholders to elect the nominees
recommended by the Board. They said that the Board's slate of "open-minded,
highly qualified and independent nominees will continue to 1) execute a growth
strategy built on a recently completed two-year transformational investment
program, 2) build on its track record of returning capital to stockholders and
3) consider other strategic opportunities to benefit stockholders."
The letter said that, "Alternatively, you could hand control of your Board
over to a slate of eight nominees proposed by Sandell Asset Management Corp.,
which has demanded, among other things, 1) the sale and leaseback of a
significant portion of Bob Evans' restaurants; 2) the sale or spinoff of Bob
Evans Foods; and 3) the rapid repurchase of an additional $350 million or more
of Bob Evans stock—actions which, in our view, would seriously jeopardize
sustainable stockholder value."
Messrs. Davis and Gasser stated that, "While we believe that Sandell Asset
Management, which reportedly managed approximately $7.5 billion in assets at
its peak but only approximately $1 billion as of 2013, may need to press
Sandell's agenda at Bob Evans to further its own business purposes, we do not
believe this should come at the expense of the best interests of Bob Evans'
stockholders."
They further stated that, "Your Board believes that Bob Evans Farms is
well-positioned for strong profit growth and value creation and that it is
critical to 1) maintain strategic control of the Company's valuable real
estate; 2) continue to realize the opportunities for growth, brand and
operating synergies available to us with a combined Bob Evans Restaurants and
Foods; and 3) continue the Company's controlled and disciplined approach to
return capital to stockholders, which has resulted in the return of more than
$800 million to stockholders since 2007 in dividends and share repurchases."
The letter also outlined Sandell's repeated rejections of the Company's
settlement offers, but added that the Board remains open to a constructive
solution.
Faced with a clear choice about the Company's direction, the Board urged
stockholders to vote the WHITE proxy card to elect the Board's slate of
director nominees at the Company's Annual Meeting on August 20, 2014.
Complete text of letter follows:
Bob Evans Farms
July 16, 2014
Dear Fellow Stockholder,
At your Company's 2014 Annual Meeting, you will have a clear choice about the
future of Bob Evans: We urge you to elect the open-minded, highly-qualified
and independent nominees recommended by your Board who will continue to 1)
execute a growth strategy built on a recently completed two-year
transformational investment program, 2) build on its track record of returning
capital to stockholders and 3) consider other strategic opportunities to
benefit stockholders.
Alternatively, you could hand control of your Board over to a slate of eight
nominees proposed by Sandell Asset Management Corp., which has demanded, among
other things, 1) the sale and leaseback of a significant portion of Bob Evans'
restaurants; 2) the sale or spinoff of Bob Evans Foods; and 3) the rapid
repurchase of an additional $350 million or more of Bob Evans stock—actions
which, in our view, would seriously jeopardize sustainable stockholder value,
as detailed in the accompanying table. While we believe that Sandell Asset
Management, which reportedly managed approximately $7.5 billion in assets at
its peak but only approximately $1 billion as of 2013,^1 may need to press
Sandell's agenda at Bob Evans to further its own business purposes, we do not
believe this should come at the expense of the best interests of Bob Evans'
stockholders.
Your Board believes that Bob Evans Farms is well positioned for strong profit
growth and value creation and that it is critical to, 1) maintain strategic
control of the Company's valuable real estate; 2) continue to realize the
opportunities for growth, brand and operating synergies available to us with a
combined Bob Evans Restaurants and Foods; and 3) continue the Company's
controlled and disciplined approach to return capital to stockholders, which
has resulted in the return of more than $800 million to stockholders since
2007 in dividends and share repurchases. We are convinced that this is the
prudent approach for the sustainable growth and value of your Company.
Your Board has unanimously determined that Sandell's agenda would jeopardize
long-term, sustainable value creation and is NOT in the best interests of the
Company and its stockholders. We strongly urge you to protect the value of
your investment by voting the WHITE proxy card today FOR ALL of your Board's
nominees.
SIGNIFICANT INVESTMENTS BY BOB EVANS HAVE ENHANCED GROWTH OPPORTUNITIES
With a revitalized and restructured asset base in each of our business
segments, our goal is to deliver consistent sales growth and margin expansion.
Pursuing Sandell's plan, which we believe is designed to maximize quick
returns at the expense of sustainable growth, would jeopardize the gains we
expect from these investments.
Bob Evans Farms has invested over $120 million in the past two years
remodeling virtually all of its restaurants. The positive impact of this
program is borne out by research conducted by WD Partners and Nation's
Restaurant News in this year's "Consumer Picks" survey, which shows Bob Evans
advancing its ranking in the areas of food quality, value, service, menu
variety, atmosphere, and cleanliness. The Company's refreshed stores have
consistently outperformed the non-refreshed stores over the last three years.
At Bob Evans Foods, we have reduced our manufacturing footprint from nine
facilities to four and consolidated our transportation facilities into one
central hub. With these investments behind us, we are poised to generate
top-line growth as we continue to effectively manage cost drivers, including
input and labor costs.
^1 Financial Times, 12/11/13; Sandell Asset Management Corp. Form ADV, filed
with the SEC for the year ending 12/31/13.
OUR COMMITMENT TO THE HIGHEST STANDARDS OF CORPORATE GOVERNANCE RESULTS IN
STRONG ACCOUNTABILITY TO STOCKHOLDERS
We consider good corporate governance essential to successful business
outcomes. We believe our stockholder rights, Board structure, and compensation
practices meet or exceed best practices. Consistent with this commitment to
rigorous, independent oversight and dynamic, open-minded leadership, we have
added four new independent directors to the Board over the last two years.
The Board composition we propose would be highly qualified, independent, and
balanced:
* Comprised of 11 fully independent directors in addition to the CEO.
* A majority of the independent directors would have been added within the
last two years.
* 5 of 11 independent directors would have been added to the Board this
year.
* Our directors would have valuable skills and experience in the restaurant,
packaged foods, hospitality and entertainment and digital marketing
sectors. At least 6 directors would be current or former CEOs, and at
least 8 directors would have other public company board service.
In addition, your management and Board are well aligned with stockholders.
Directors and officers collectively own – either beneficially or through
deferred compensation plans – over 900,000 shares, putting them in the top 10
among Company stockholders.
WE HAVE USED GOOD FAITH EFFORTS TO WORK CONSTRUCTIVELY WITH SANDELL
Consistent with our fiduciary duties to you and with our high governance
standards, your Board of Directors has tried to work constructively with Mr.
Sandell for nearly twelve months, carefully considering his ideas and
proposing ways to add new independent and highly-qualified individuals to the
Board. We subject our financial and strategic plans to rigorous review on a
regular basis – including in consultation with independent financial advisors
– and we always welcome fresh thinking.
With that in mind, we have engaged repeatedly with Sandell since July 2013,
including by arranging meetings and discussions between Mr. Sandell and our
executive management, our Lead Independent Director and our independent
financial advisor, in an effort to better understand and consider his
proposals. As early as January, we offered Mr. Sandell the opportunity to
consult with the Board in the addition of new independent directors to the
Board. Sandell refused the offer.
The Board's numerous further efforts to avoid the extraordinary time and cost
demands of a proxy contest have also met with frustration, as detailed in the
Company's proxy statement previously sent to you. Our most recent settlement
proposal would have resulted in Sandell's nominees constituting a full quarter
of the Board, while half the Board – including a majority of the independent
directors – would have joined this year. Additionally, we proposed adding two
Sandell nominees to the Finance Committee, resulting in a six-person
Committee, half of which would have been new to the Board this year and
charging the Committee with reviewing Sandell's economic proposals and other
opportunities to enhance stockholder value. The Committee also would have had
the ability to retain an additional independent investment bank to assist with
that review. Our proposal would have ensured another fresh and independent
review of Sandell's proposals. Sandell, however, spurned this offer as well.
Despite Sandell's repeated rejections of our settlement offers, we remain open
to a constructive solution as is clearly demonstrated by our decision to keep
the Board size at 12 even with the retirement of two incumbent directors
before the 2014 annual meeting. Since the Board has nominated a slate of 10
directors for these 12 positions, we expect that at least two of Sandell's
nominees will be elected even if our entire slate is elected.
YOUR BOARD IS COMMITTED TO MAINTAINING AN OPEN AND CONSTRUCTIVE APPROACH
While we are disappointed that Mr. Sandell has not responded in a manner that
we consider constructive to the openness we have shown him over the past year,
we are committed to continue working with our investors to ensure that we
consider all options for enhancing stockholder value. We will continue to
carefully and comprehensively review our plans and strategies – and to measure
their success based on performance in the markets we serve – with the
overriding objective of serving your best interests.
For all of these reasons, we urge you to submit your voting instructions on
the enclosed WHITE proxy card to vote "FOR ALL" of your Company's nominees to
the Board. We urge you NOT to vote using any gold proxy card sent to you by
Sandell, as even a "withhold" vote with respect to Sandell's nominees will
cancel any previous WHITE proxy card that you submitted.
Thank you for your continued support.
Sincerely,
/s/ Michael A. Gasser
Michael A. Gasser
Lead Independent Director
/s/ Steven A. Davis
Steven A. Davis
Chairman of the Board and Chief Executive Officer
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