Bob Evans Farms, Inc. (NASDAQ:BOBE) today announced two
transformational transactions resulting from the board of
directors’ strategic review of the Company’s alternatives for
creating shareholder value.
The sale of Bob Evans Restaurants and the acquisition of
Pineland Farms Potato Company (“PFPC”) marks the beginning of a new
era at Bob Evans Farms (“Bob Evans”) in which the Company will
focus exclusively on realizing the full potential of its BEF Foods
business. BEF Foods is the national market share leader in
refrigerated dinner side dishes, and is also the market share
leader in sausage products in its core Midwest markets. The new Bob
Evans, further strengthened by the manufacturing and intellectual
capital of PFPC, is positioned to be a higher profit and higher
growth company that is expected to provide better returns to
shareholders and an enhanced product line for customers.
The Company has entered into a definitive agreement for the sale
of Bob Evans Restaurants to an affiliate of Golden Gate Capital for
$565 million plus assumption of certain net working capital
liabilities at the time of closing estimated to be $40 to $50
million. The Company estimates that cash proceeds net of taxes and
transaction-related costs will be $475 to $485 million. As
discussed below, net cash proceeds are expected to be used to repay
current indebtedness and payment of a special dividend.
Additionally, the Company entered into a definitive agreement for
the purchase of PFPC for $115 million. The purchase price may be
increased by up to $25 million if certain financial metrics are
achieved during a 24-month period after closing.
President and Chief Executive Officer Saed Mohseni said, “Today
we announced two transactions that are a major step in our
strategic transformation that we believe will continue Bob Evans’
history of success. The sale of Bob Evans Restaurants enables us to
concentrate exclusively on BEF Foods, our fastest growing and most
profitable segment. We believe this focus will result in higher
returns for our shareholders and, as a more focused private
business, Bob Evans Restaurants will be better able to deliver on
its brand promise of providing quality food and hospitality to
every guest at every meal. Bob Evans Restaurants has made
tremendous progress over the last few years as our teams have
strived to upgrade every aspect of the guest experience. We believe
our talented restaurant teams, combined with Golden Gate Capital’s
industry expertise and significant resources, positions Bob Evans
Restaurants well for realizing its full potential.
“I am also pleased that we have signed an agreement to purchase
PFPC. We believe this transaction will better enable BEF Foods to
continue growing and innovating. The acquisition of PFPC not only
increases our side-dish production capacity, it provides capability
to produce and sell diced and shredded potato products in both the
retail and foodservice channels. The acquisition also diversifies
our production capability by adding a second state-of-the-art
potato processing facility with 180 million pounds of capacity, 50
million pounds of which are expected to come online in April 2017.
Furthermore, PFPC comes with a 900 acre potato farm and is
surrounded by an additional 55,000+ acres of annual potato
production. Its close proximity to tens of thousands of acres of
potato production is particularly attractive as it greatly reduces
transportation costs. BEF Food’s side-dish product mix is expected
to reach 66% of sales volume by 2020, and the PFPC acquisition
mitigates the need for near term capital spending for additional
capacity to meet our growth targets. Following the completion of
these transactions, Bob Evans will be focused exclusively on sales
and profit growth of BEF Foods.”
Executive Chairman Doug Benham said, “The board of directors has
consistently evaluated all options for creating shareholder value.
From the outset, our philosophy has been to engage in a robust and
deliberate process in an effort to make what we believe are the
best decisions for shareholders. We believe these transactions are
the best options for creating shareholder value and providing for
the future success of these two great businesses.
“Following the closing of the Bob Evans Restaurants transaction,
Mike Townsley, President, BEF Foods, will assume the role of
President and Chief Executive Officer of Bob Evans. Mike joined Bob
Evans as president and chief operating officer of Owens Foods, Inc.
in June 2003. Mike was appointed president of BEF Foods in June
2008. He also served as co-chief executive officer from December
2014 to September 2015. Mike has been the driving force behind the
transformation of BEF Foods and we look forward to continued strong
leadership from him and his team, including Chief Administrative
and Chief Financial Officer Mark Hood who will remain in his role.
The board appreciates the extraordinary talent, energy, and vision
that Saed Mohseni has brought to Bob Evans and is excited that he
has agreed to continue leading Bob Evans Restaurants following the
transaction.”
Josh Cohen, Managing Director at Golden Gate Capital, said, “Bob
Evans Restaurants is an exceptional brand, uniquely differentiated
by its deep-rooted heritage of farm-fresh food and heartfelt
hospitality. As an independent company partnered with Golden Gate
Capital, Bob Evans Restaurants will be well-positioned to sharpen
its focus on enhancing the business, with increased flexibility and
resources to grow the company for the long-term. We look forward to
working with Saed Mohseni and the talented management team to
support Bob Evans Restaurants as it enters this exciting new
chapter.”
Chief Administrative and Chief Financial Officer Mark Hood said,
“The Company expects to provide an updated GAAP EPS guidance range
and recast Bob Evans Restaurants’ results as discontinued
operations when it reports third quarter fiscal 2017 results. We
are reaffirming our full-year fiscal 2017 non-GAAP diluted EPS
guidance range of $2.15 to $2.30, assuming a closing date of April
28, 2017, on the aforementioned transactions. Furthermore, it is
our expectation that our board of directors will declare a special
dividend of approximately $150 million ($7.50 per share)
representing net cash proceeds from the sale of Bob Evans
Restaurants after repayment of debt within 60 days following the
transaction. Additionally, the board of directors increased the
Company’s existing share repurchase authorization to $100 million
through calendar year 2017. We also anticipate continuation of our
quarterly dividend payments, currently at $0.34 per
share.
“We are also providing fiscal year 2018 preliminary revenue and
EBITDA targets of $470 million, and $105 million, respectively. We
expect to establish a $300 million credit facility at the time of
the transaction closings and expect that our targeted leverage
range will be 1.0-2.0x which provides considerable flexibility to
continue to grow and invest in BEF Foods.”
CONFERENCE CALL DETAILS:
The Company will host a conference call to discuss this
announcement at 8:30 a.m. (ET) on Wednesday, January 25,
2017. The dial-in number for the conference
call is (855) 468-0551, access code 54342985. A replay will be
available at (800) 585-8367, access code 54342985.
A simultaneous webcast will be available at
http://investors.bobevans.com/events.cfm. The archived webcast will
also be available on the Web site.
The closings of the transactions are each subject to expiration
of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, and other customary closing conditions.
The sale of the Bob Evans Restaurants business to Golden Gate
Capital is not subject to a financing condition. Under the terms of
the definitive agreement for the sale of the Bob Evans Restaurants
business, the Company will provide certain transactional support
services to the buyer for a period of 18 to 24 months following the
closing.
Under the terms of the definitive agreement for the sale of the
Bob Evans Restaurant business, the Company may solicit superior
proposals from third parties through February 28, 2017. It is not
anticipated that any developments will be disclosed with regard to
this process unless the Company’s Board of Directors makes a
decision with respect to a potential superior proposal. There are
no guarantees that this process will result in a superior
proposal.
J.P. Morgan Securities LLC served as financial advisor to the
Company on the sale of Bob Evans Restaurants. UBS Investment Bank
served as financial advisor to Golden Gate Capital.
Information concerning this event was filed by the Company today
with the Securities and Exchange Commission and can be obtained at
www.sec.gov.
(1)Non-GAAP Financial
MeasuresWe have included in this release a forecast of
adjusted diluted EPS and EBITDA for future periods. These
forward-looking financial measures are not presented in accordance
with U.S. Generally Accepted Accounting Principles (U.S.
GAAP).
Our non-GAAP measures are used by analysts, investors and other
interested parties to compare our performance with the performance
of other companies that report similar non-GAAP measures. We
believe these non-GAAP measures provide meaningful supplemental
information regarding financial performance by excluding certain
expenses and benefits that may not be indicative of core business
operating results. We believe the non-GAAP measures, when viewed in
conjunction with U.S. GAAP results and the accompanying
reconciliations, enhance the comparability of results against prior
periods and allow for greater transparency of financial results and
business outlook. In addition, we use non-GAAP data internally to
assess performance and facilitate management's internal comparison
of our financial performance to that of prior periods, as well as
trend analysis for budgeting and planning purposes. The
presentation of our non-GAAP measures is not intended to be
considered in isolation or as a substitute for, or superior to, the
financial information prepared and presented in accordance with
U.S. GAAP. Furthermore, our non-GAAP measures may not be comparable
to similarly titled measures reported by other companies and may
have limitations as an analytical tool. We define EBITDA as GAAP
net income plus interest expense, provision for income taxes,
depreciation, and amortization.
Reconciliations of the Company’s projected adjusted diluted EPS
for fiscal year 2017 and EBITDA for fiscal year 2018 to the most
directly comparable GAAP financial measures are omitted from this
release because the Company is unable to provide such
reconciliations without unreasonable effort. In particular, in
light of the transactions being announced in this release,
management is not able to calculate certain amounts necessary to
provide corresponding forecasted financial measures calculated in
accordance with GAAP and related reconciliations at this time as a
result of the complexity of recasting historical information to
reflect the Company’s Bob Evans Restaurants segment as a
discontinued operation, the complexity in completion of purchase
accounting related to the PFPC acquired assets and operations on a
pro forma basis, and the inherent difficulty in forecasting
generally and in quantifying certain projected amounts that are
necessary for such calculations and reconciliations.
Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995Certain statements in this
news release that are not historical facts are forward-looking
statements. Forward-looking statements involve various important
assumptions, risks and uncertainties. Actual results may differ
materially from those predicted by the forward-looking statements
because of various factors and possible events. The risks and
uncertainties in connection with such forward-looking statements
related to the proposed transactions include, but are not limited
to, the occurrence of any event, change or other circumstances that
could delay the closing of either of the proposed transactions; the
possibility of non-consummation of the proposed transactions and
the termination of the respective transaction agreements; the
failure to satisfy any of the conditions to the respective
transaction agreements; adverse effects on the Company’s common
stock because of the failure to complete either of the proposed
transactions; the Company’s businesses experiencing disruptions due
to transaction-related uncertainty or other factors making it more
difficult to maintain relationships with employees and business
partners; significant transaction costs related to the proposed
transactions; and the dependence on the proposed special dividend
of the consummation of the sale of the Bob Evans Restaurants
Business. Additional information about the factors and events that
could cause actual results to differ materially from those
predicted by the forward looking statements, along with certain
other risks, uncertainties and assumptions related to the Company
and its business, may be found in our Annual Report on Form 10-K
for the fiscal year ended April 29, 2016, and in our other filings
with the Securities and Exchange Commission. We note these factors
for investors as contemplated by the Private Securities Litigation
Reform Act of 1995. Predicting or identifying all such risk factors
is impossible. Consequently, investors should not consider any such
list to be a complete set of all potential risks and uncertainties.
Forward-looking statements speak only as of the date on which they
are made, and we undertake no obligation to update any
forward-looking statement to reflect circumstances or events that
occur after the date of the statement to reflect unanticipated
events. All subsequent written and oral forward-looking statements
attributable to us or any person acting on behalf of the Company
are qualified by the cautionary statements in this section.
About Bob Evans Farms, Inc.Bob Evans Farms,
Inc. owns and operates full-service restaurants under the Bob Evans
Restaurants brand name. At the end of the second fiscal quarter
(October 28, 2016), Bob Evans Restaurants owned and operated 522
family restaurants in 18 states, primarily in the Midwest,
mid-Atlantic and Southeast regions of the United States. Bob Evans
Farms, Inc., through its BEF Foods segment, is also a leading
producer and distributor of refrigerated side dishes, pork sausage,
and a variety of refrigerated and frozen convenience food items
under the Bob Evans and Owens brand names. For more information
about Bob Evans Farms, Inc., visit www.bobevans.com.
About Pineland Farms Potato CompanyNearly
twenty years ago a group of fourth generation Maine potato farmers
had a vision that would create jobs, business opportunities, and a
brighter future for the young people of northern Maine. In 1997,
they built a state-of-the-art potato processing facility that
transformed the thousands of acres of potatoes grown in the region
from a commodity to a refrigerated ready-to-cook product. In
addition to contracting processing potatoes from many family-owned
farms, the company purchased its own farming operation in 2012 and
became a vertically integrated business. The company’s key products
include a wide variety of cut and mashed potato products serving
retail and foodservice customers.
About Golden Gate CapitalGolden Gate Capital is
a San Francisco-based private equity investment firm with over $15
billion of capital under management. The principals of Golden Gate
Capital have a long and successful history of investing across a
wide range of industries and transaction types, including
going-privates, corporate divestitures, and recapitalizations, as
well as debt and public equity investments. Representative
restaurant/retail investments sponsored by Golden Gate Capital
include Red Lobster, California Pizza Kitchen, On The Border
Mexican Grill & Cantina, Eddie Bauer, Express, Pacific Sunwear,
Payless ShoeSource and Zales.
BOBE-G
Contacts:
Bob Evans Farms, Inc.
Scott C. Taggart
Vice President, Investor Relations
(614) 492-4954
Golden Gate Capital
Jenny Gore/Alyssa Linn
(312) 895-4700/(310) 201-2040
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