Item 1.01.
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Entry into a Material Definitive Agreement.
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Purchase Agreement for the Sale of Bob Evans Restaurants
Business
On January 24, 2017, Bob Evans Farms, Inc., a Delaware corporation (the
Company
), entered into an
Asset and Membership Interest Purchase Agreement (the
Purchase Agreement
) with BER Acquisition, LLC, a Delaware limited liability company formed by affiliates of Golden Gate Capital (the
Buyer
). Pursuant to the
Purchase Agreement, subject to the satisfaction or waiver of certain conditions, the Buyer has agreed to purchase and acquire the Companys Bob Evans Restaurants business (the
Restaurants Business
) for an aggregate purchase
price of $565.0 million in cash, subject to certain adjustments set forth in the Purchase Agreement (the
Transaction
). The Transaction will be effected by (i) the sale of the Restaurants Business assets by the
Companys affiliates to Buyer and (ii) the sale by the Company of fifty percent of the equity interests in a newly formed special purpose entity (the
IPCo
) that will hold specified intellectual property assets used by
both the Restaurants Business and the Companys BEF Foods food production business (the
BEF Foods Business
).
The
Companys Board of Directors has unanimously approved the Purchase Agreement and the transactions contemplated thereby, including the Transaction. The Buyer has obtained equity commitments for the full amount of the purchase price in the
Transaction from an affiliate of Golden Gate Capital, and the obligations of the Buyer pursuant to the Purchase Agreement are not subject to any financing condition. The closing of the Transaction is anticipated to occur on or prior to
April 28, 2017, subject to regulatory approvals and other closing conditions set forth in the Purchase Agreement.
The Purchase
Agreement contains customary representations, warranties and covenants by each party, including, among others, covenants with respect to the Companys operation of the Restaurants Business during the interim period between the execution of the
Purchase Agreement and the consummation of the Transaction. The consummation of the Transaction is subject to customary closing conditions, including, but not limited to, (i) the early termination or expiration of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
HSR Act
), (ii) the absence of certain legal impediments to the consummation of the Transaction, (iii) the receipt of specified consents and
approvals, (iv) the accuracy of the representations and warranties of the parties, subject to materiality exceptions, and (v) compliance by the parties with their respective obligations under the Purchase Agreement.
Both the Company and the Buyer have agreed to indemnify the other party for losses arising from certain breaches of the Purchase Agreement and
for certain other liabilities, subject to applicable limitations set forth in the Purchase Agreement. In connection with the Transaction, the Company and the Buyer (or one or more of their respective affiliates) also will enter into certain
additional ancillary agreements, including (i) a transition services agreement pursuant to which both the Company and the Buyer will provide transition services to the other party at the providers cost for a period of 18 months following
the closing; (ii) a five-year supply agreement pursuant to which the BEF Foods Business will continue to supply food products to the Restaurants Business following the closing; and (iii) intellectual property assignment, contribution and
license agreements pursuant to which certain intellectual property rights of the Company and its affiliates will be transferred to the Buyer or contributed to the IPCo entity that will be jointly owned by affiliates of the Buyer and the Company and
will license such intellectual property rights to the Buyer for use in the Restaurants Business and to the Company for use in the BEF Foods Business following the closing.
For a period of 35 days following the date of the Purchase Agreement (the
Go-Shop
Period
), the Company and its affiliates and representatives may solicit proposals from, and negotiate with, third parties for a sale of the Restaurants Business in its entirety. The Buyer will have
the right to match, within a limited time, any alternative transaction proposal received by the Company during the
Go-Shop
Period that the Board determines in good faith to constitute a superior proposal. At
the end of the
Go-Shop
Period, the Company will cease such activities, and will be subject to
no-shop
restrictions on its ability to solicit or engage in
discussions or negotiations with third parties regarding an alternative transaction proposal. The Purchase Agreement also contains certain termination rights for each of the Company and the Buyer subject to the conditions set forth in the Purchase
Agreement. The Company will be obligated to pay to Buyer a termination fee of $15.0 million, plus reimbursement of Buyers transaction expenses up to $5.0 million, in the event that the Purchase Agreement is terminated in certain
circumstances.
A copy of the Purchase Agreement is attached as Exhibit 2.1 to this Current Report on Form
8-K
and incorporated herein by reference. The foregoing summary of the Purchase Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its
entirety by, the full text of the Purchase Agreement.
Discontinued Operations
The Company will classify the Restaurants Business as held for sale beginning in the third quarter of fiscal 2017, and the results of the
Restaurants Business will be presented as discontinued operations in the Companys Quarterly Report on
Form 10-Q
for the quarter ending January 27, 2017. As a result of the classification of the
disposal group as held for sale, under the Financial Accounting Standards Board Accounting Standards Codification
360-10-35,
long lived assets held for sale are measured
at the lower of carrying amount or fair value less costs to sell. Upon the closing of the Transaction, the Company expects to record a gain on the sale, net of taxes.
Purchase Agreement for the Acquisition of Pineland Farms Potato Company, Inc.
On January 24, 2017, the Companys subsidiary BEF Foods, Inc. (
BEF Foods
) entered into a Stock Purchase Agreement
(the
PFPC Agreement
) with Pineland Farms Potato Company, Inc., a Maine corporation (
PFPC
), the stockholders of PFPC party thereto (collectively, the
Sellers
), and Libra Foundation, as the
Sellers Representative, and, solely for the purposes of guaranteeing the payment and performance obligations of BEF Foods thereunder, the Company. Pursuant to the PFPC Agreement, subject to the satisfaction or waiver of certain conditions, BEF
Foods has agreed to purchase and acquire from the Sellers all of the equity interests of PFPC outstanding immediately prior to the closing (the
Acquisition
), in exchange for (i) $115.0 million in cash, subject to certain
adjustments set forth in the PFPC Agreement, and (ii) up to an additional $25.0 million in cash as potential
earn-out
consideration, the payment of which is subject to the achievement of certain
operating EBITDA performance milestones over a consecutive twelve-month period during the 24 months following the closing.
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The Companys Board of Directors has unanimously approved the PFPC Agreement and the
transactions contemplated thereby, including the Acquisition. The closing of the Acquisition is anticipated to occur on or about April 28, 2017, subject to regulatory approvals and other closing conditions set forth in the PFPC Agreement.
The PFPC Agreement contains customary representations, warranties and covenants by each party, including, among others, covenants with respect
to the conduct of PFPCs business during the interim period between the execution of the PFPC Agreement and the consummation of the Acquisition. The PFPC Agreement also contemplates that, prior to the closing of the Acquisition, all of the
assets and liabilities of PFPC exclusively related to its cheese business will be distributed to the Sellers or one or more parties designated by the Sellers. The consummation of the Acquisition is subject to customary closing conditions, including,
but not limited to, (i) the early termination or expiration of the applicable waiting period under the HSR Act, (ii) the absence of certain legal impediments to the consummation of the Acquisition, (iii) the accuracy of the
representations and warranties of the parties, subject to materiality exceptions, and (iv) compliance by the parties with their respective obligations under the PFPC Agreement.
Both BEF Foods and the Sellers have agreed to indemnify the other party for losses arising from certain breaches of the PFPC Agreement and for
certain other liabilities, subject to applicable limitations set forth in the PFPC Agreement. In connection with the Acquisition, BEF Foods will enter into, or cause PFPC to enter into, certain additional ancillary agreements, including a transition
services agreement, an intellectual property license agreement, an escrow agreement, and an employment agreement with one of PFPCs executive officers.
A copy of the PFPC Agreement is attached as Exhibit 2.2 to this Current Report on Form
8-K
and
incorporated herein by reference. The foregoing summary of the PFPC Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the PFPC Agreement.
The Purchase Agreement and the PFPC Agreement (collectively, the
Agreements
) are not intended to modify or supplement any
factual disclosures about the Company in its public reports filed with the Securities and Exchange Commission and are not intended to be, and should not be relied upon as, disclosures regarding any facts and circumstances relating to the Company. In
particular, the representations, warranties and covenants set forth in the Agreements (i) were made solely for purposes of the Transaction or the Acquisition, as applicable, and solely for the benefit of the contracting parties (except with
respect to the rights of specific third parties enumerated in the Agreements), (ii) may be subject to limitations agreed upon by the contracting parties, including certain disclosure schedules, (iii) are qualified in certain circumstances by a
materiality standard which may differ from what may be viewed as material by investors, (iv) were made only as of the date(s) specified in the Agreements, and (v) may have been included in such Agreement(s) for the purpose of allocating
risk between the parties rather than establishing matters as facts. Investors are not third-party beneficiaries under the Agreements and should not rely on the representations, warranties and covenants or any descriptions thereof as
characterizations of the actual state of facts or conditions of the parties. Moreover, information concerning the subject matter of the representations and warranties may change after the respective dates of the Agreements.
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