Attached files
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| EX-99.2 - PRESS RELEASE - BOB EVANS FARMS INC | d771855dex992.htm |
| 8-K - CURRENT REPORT - BOB EVANS FARMS INC | d771855d8k.htm |
 Setting
the Record Straight
August 2014
Exhibit 99.1 |
 Important Additional Information
2
Bob Evans Farms Inc. (the “Company”), its directors and certain of its
executive officers are participants in the solicitation of proxies in
connection with the Company's 2014 Annual Meeting of Stockholders. The Company has filed a definitive proxy statement and
form of WHITE proxy card with the U.S. Securities and Exchange Commission (the
“SEC”) in connection with such solicitation of proxies from the
Company's stockholders. WE URGE INVESTORS TO READ THE DEFINITIVE PROXY STATEMENT
(INCLUDING ANY AMENDMENTS AND SUPPLEMENTS THERETO) AND ACCOMPANYING WHITE PROXY
CARD CAREFULLY AND IN THEIR ENTIRETY, BECAUSE THEY CONTAIN IMPORTANT
INFORMATION. Information regarding the names of the Company's directors and
executive officers and their respective interests in the Company by
security
holdings
or
otherwise,
is
set
forth
in
the
Company's
proxy
statement
for
its
2014
Annual
Meeting
of
Stockholders,
filed
with
the SEC on July 11, 2014. Stockholders will be able to obtain, free of charge,
copies of the definitive proxy statement (and amendments or supplements
thereto) and accompanying WHITE proxy card, and other documents filed with the SEC at the SEC's
website at www.sec.gov. In addition, copies will also be available at no charge at
the Investors section of the Company's website at
http://investors.bobevans.com/sec.cfm.
This document contains quotes and excerpts from certain previously published
material. Consent of the author and publication has not been sought or
obtained to use the material as proxy soliciting material. |
 Executive Summary: Consider the Facts
3
The Bob Evans Board believes that:
o
We have transformed the business while returning over $800 million to shareholders
since FY07 (including over $250 million in FY14)
o
We have a clear plan for continued, sustainable value creation as we emerge from
this investment and transformation phase
o
Sandell’s
“plan”
of
financial
engineering
has
shifted
a
number
of
times
since
he
entered
the stock last year
o
Sandell’s agenda is not in the best interests of the Company or its
stockholders; it is a misleading attempt to generate short-sighted
profit with no guarantees o
Bob Evans’
current leadership is the right team to lead the Company and maximize
stockholder value
Vote
for
Bob
Evans’
Nominees
on
the
WHITE
Card
Our proposed Board structure would result in an open-minded Board with diverse, relevant
perspectives and a range of tenure and would include two Sandell nominees
|
 Sandell Remains Focused on a Flawed Agenda
for Short-Sighted Financial Engineering
4
After pushing specific financial engineering for nearly a year, Sandell suddenly
seeks to distance himself from his own economic agenda by scrubbing from his
latest presentation any mention of the flawed plans he has aggressively
insisted the Company immediately implement Sandell now claims that the
upcoming Annual Meeting “is NOT about any specific transaction”.
Notwithstanding this recent claim, stockholders should consider that:
o
As
recently
as
June
2014,
in
response
to
Bob
Evans’
offers
to
settle
the
proxy
contest,
Sandell
showed
his
true
colors
by
demanding
that
the
Company
implement
1)
a
sale
or
spin-off
of
BEF
by
the
end
of
CY14,
2)
a
sale-leaseback
of
nearly
half
of
the
Company’s
real
estate
within
90
days
and
3)
a
$350
million
share
repurchase
within
90
days
o
In
an
interview
in
July
2014,
Sandell
asserted
that
his
nominees,
if
elected
“will
take
immediate
steps
to
implement
a
comprehensive
plan
that
contemplates
operational,
financial
and
strategic
changes”
¹
While the Bob Evans Board welcomes ideas from stockholders, customers and employees,
Sandell’s hastily prepared operational suggestions are of limited utility
since they either lack substance or already are being implemented by the
Company THOUGH SANDELL TRIES TO DOWNPLAY HIS SHORT-SIGHTED AGENDA OF
FINANCIAL ENGINEERING, THE BOARD URGES STOCKHOLDERS NOT TO BE MISLED
(1)
The Activist Report, July 2014. |
 5
Sandell’s Shifting Demands for Financial
Engineering
AUGUST 5, 2013
SEPTEMBER 24, 2013
NOVEMBER 11, 2013
DECEMBER 9, 2013
APRIL 24, 2014
JUNE 10, 2014
JULY 2, 2014
JULY 28, 2014
Quickly reverted
back to financial
engineering;
subsequently
cloaked by more
vague generalities
Spin-off at 10x+
EBITDA or sell for
low-teens multiple
of EBITDA
Spin-off, or sell
for 11x FY14
EBITDA or
$558mm
Sell, or sell 19.9%
via IPO followed
by spin-off or
split-off, or split-
off at 11x FY15
EBITDA and
exchange for Bob
Evans shares at
$63/share
Sell 19.9% via
IPO followed by
spin-off or split-off
of remaining
80.1%, or split-off
at 10.5x FY15
EBITDA and
exchange for Bob
Evans shares at
$60/share and
retire 10mm
shares
Analyze /
implement
optimal structure
and evaluate
overtures
Sale or spin-off of
BEF by end of
CY14
Explore /
implement
Strategic review
100% for
~$720mm
100% for
~$720mm
~56% for
~$400mm
~56% for
~$400mm
50% for
~$450mm
43% for
undisclosed
amount within 90
days
Explore /
implement
“Top down”
analysis
Use after-tax
proceeds of
~$1.0bn from sale
of BEF and sale-
leaseback to
repurchase
~19mm shares at
$55/share
Use ~$800mm of
after-tax proceeds
from sale of BEF
and sale-
leaseback to
repurchase
~14mm shares at
$58/share
Use proceeds of
$400mm from
sale-leaseback
and $175mm of
incremental debt
to implement
$575mm self-
tender at
$63/share
Use proceeds of
~$400mm from
sale-leaseback
and $175mm of
incremental debt
to repurchase
~9.6mm shares at
$60/share
Use proceeds of
~$450mm from
sale-leaseback to
repurchase
~9.1mm shares at
$50/share
Use proceeds
from sale-
leaseback to
repurchase
$350mm of stock
within 90 days
Explore /
implement
??
>$72
$73-$84
$80-$90,
depending on
assumptions
$81
~$76 -
~$91
NA
NA
NA |
 Sandell’s Misleading Claims/
Overstated
Criticisms
¹
The Facts
Sandell claims that Bob Evans’
stockholders have “suffered
years of woeful under-
performance”
Sandell’s
own
analysis
illustrates
that
the
Company
outperformed
the
S&P
500
by
over
10%
over
the
last
10
years
and
performed
generally
in-line
with
his
“Family
and
Casual
Dining”
peers
(Bob
Evans meaningfully outperformed RRGB & CAKE, performed in-line with BJRI
& EAT and underperformed DRI & CBRL) over the same time period
In fact, Sandell’s own relative performance graphs for each of the 1-year,
3-year, 5-year and 10-year periods illustrate that Bob Evans
performed generally in-line with Sandell’s peer set until late 2013
Sandell claims that the Company
“cherry-picked”
dates to measure
shareholder return
Measuring
performance
since
Steve
Davis
began
as
CEO
in
May
2006
is
the
most
relevant
time
period to evaluate the Board and management
From
May
1,
2006
to
July
31,
2014,
the
Company
has
meaningfully
outperformed
Sandell’s
own
“Family
and
Casual
Dining”
peer
group
by
~25%
Sandell NOW claims that DIN,
DENN and RT are not comparable
to Bob Evans
As recently as December 9, 2013, Sandell expressly included DIN and DENN in
Sandell's "peer group"
Each of DIN, DENN and RT are widely considered to be notable family/casual
competitors to Bob Evans
If
DIN,
DENN
and
RT
were
justly
included
in
Sandell’s
“peer
group”,
Bob
Evans’
outperformance
from May 1, 2006 to July 31, 2014 would be even more pronounced (~40%)
6
(1)
Sandell presentation, filed with the SEC August 4, 2014.
Sandell Continues to Make Misleading
Statements and Overstated Claims
A few of his misleading statements and overstated claims are highlighted below
|
 Sandell’s Misleading Claims/
Overstated Criticisms
The Facts
Sandell claims that Bob Evans’
“exposure to the weather was not
unique”
Bob
Evans
has
the
most
Midwest
exposure
of
any
sizable
family
or
casual
dining
chain
Analysts
appreciate
this
fact:
“CBRL
only
has
~21%
of
units
in
Midwest,
vs.
~61%
for
BOBE,
who
revealed
stores
outside
the
Midwest
had
positive
comps
(e.g.
Florida).”
–
Oppenheimer,
January
22, 2014
Sandell claims that “All eight of
Sandell’s nominees are
completely independent of
Sandell Asset Management”
Each
of
Sandell's
nominees
is
contractually
prohibited
from
publicly
expressing
any
opinion
on
Bob
Evans,
including
on
Sandell’s
economic
proposals,
without
Sandell's
prior
permission
None of Sandell’s nominees agreed to the Board’s good-faith effort to
meet to evaluate their candidacy in accordance with corporate governance best
practices Sandell mocks Bob Evans’
Broasted Chicken initiative, while
claiming that Sandell sees many
“low hanging fruit”
opportunities
Bob
Evans
is
committed
to
innovation
and
systematic
testing
and
evaluation
of
numerous
initiatives
to drive same-store sales
As
a
specific
example,
Broasted
Chicken
is
an
exclusive
(10
year
term),
trademarked
cooking
platform
that
will
meaningfully
differentiate
the
Company
from
its
family
dining
peers,
and
has
delivered significant sales increases in our test markets
Sandell
claims
that
Mimi’s
Café
is
an example of “failed Board
stewardship of the highest order”
Sandell
repeatedly
refers
to
Mimi’s
Cafe,
a
business
that
was
acquired
in
2004
and
was
sold
months
before
Sandell
began
to
buy
Bob
Evans’
stock
Steve
Davis
was
appointed
CEO
and
seven
of
the
Company’s
10
nominees
joined
the
Board
after
Mimi’s was acquired
Following the Board's decision to divest Mimi’s, the Company's stock gained
~20% in value between announcement to explore strategic alternatives for
Mimi’s (11/19/12) and the announcement of the sale agreement
(1/28/13) 7
(1)
Sandell presentation, filed with the SEC August 4, 2014.
Sandell Continues to Make Misleading
Statements and Overstated Claims (cont’d)
1 |
 Sandell’s Misleading Claims/
Overstated Criticisms
The Facts
Sandell claims that average
director tenure is in excess of 14
years
Sandell presents old, stale and inaccurate portraits of your Board's composition; he
overstates current director tenure by a factor of ~80%, criticizes retired
directors and pretends the three newest independent directors do not
exist Sandell’s calculations of director tenure include Gordon Gee, who
has not been a director for months, and Larry Corbin and Robert Lucas, who
are not standing for reelection, but curiously ignores
Kathy
Lane,
Larry
McWilliams
and
Kevin
Sheehan,
who
each
joined
the
Board
in
April
2014
and are standing for reelection
Bob
Evans’
nominees
would
have
an
average
tenure
of
less
than
eight
years,
which
is
below
the
average tenure of 8.6 years for S&P boards
Sandell claims that Bob Evans’
Board is not committed to
“transparency and fresh,
independent thinking”
Bob Evans makes a practice of being available to investors, engaging in regular and
frequent communication and participating at most of the major consumer and
restaurant conferences As a result of our comprehensive investor outreach and
road shows, we have been able to increase research coverage from one to six
analysts over the past eight years The Board remains committed to maintaining
a dynamic, independent and highly qualified Board Bob Evans has attempted to
engage in constructive dialogue with Sandell on numerous occasions Bob Evans
is and has been willing to settle the proxy contest with the addition of an appropriate
number of open-minded, independent directors
Sandell
has
rebuffed
several
attempts
by
the
Board
to
settle
the
proxy
contest
8
(1)
Sandell presentation, filed with the SEC August 4, 2014.
Sandell Continues to Make Misleading
Statements and Overstated Claims (cont’d)
1 |
 9
Sandell Manipulates the Data
to Try to Justify His Flawed Agenda
Sandell
has
repeatedly
shifted
his
“peer
group”
to
blatantly
exclude
underperforming
peers
o
Sandell’s
three
presentations
–
filed
with
the
SEC
on
September
24,
2013,
December
9,
2013
and
April
24,
2014
–
compare
Bob
Evans’
stock
performance
against
three
different,
cherry-picked
peer
groups
¹
In
Sandell’s
July
2014
presentation,
Sandell
omits
Denny’s,
DineEquity
and
Ruby
Tuesday’s
from
his
latest
set
of
Bob
Evans’
peers. A
reasonable list of family and casual dining peers would be expected to include each
of these three companies o
Indeed,
Sandell’s
December
2013
presentation
stated
that
Denny’s
and
DineEquity
are
two
of
Bob
Evans’
“more
relevant
family
dining
peers”
The
fact
remains
that
–
whether
these
three
missing
peers
are
included
in
the
Sandell-constructed
peer
group
or
excluded
–
Bob
Evans
has
consistently
outperformed
Sandell’s
selected
peer
group
since
Steve
Davis
became
CEO
in
May
2006
through
July
31,
2014
Sandell Family & Casual
Dining Peers: +77%
Proxy Peers: +136%
Sandell Peer Group Plus
DENN, DIN and RT: +61%
Sandell’s
ever-shifting
economic
demands
and
curiously
“evolving”
peer
groups
aside,
Bob
Evans
is
focused
on
enhancing
performance
and
executing
on
our
value-creating
initiatives
under
the
leadership
of
an
independent,
open-minded
and
refreshed
Board
Sandell Peer Group Plus
DENN, DIN and RT
Proxy Peers
Sandell Family & Casual Dining
Peers
+102%
Source: FactSet as of 7/31/14. (1)
Sandell’s presentations, filed on Schedule 14A with the SEC on September 24, 2013, December 9, 2013 and April 24, 2014, compare the Company’s stock performance against as few as three and as many
as eight different companies, and each of the following has been both excluded at least once and
included at least once: BJRI, BLMN, CAKE, DENN, DIN, DRI, EAT, RRGB, TXRH. |
 Sandell’s Misleading Claims/
Overstated Criticisms
The Facts
On May 30, 2014, Sandell claimed
that “at no point in our almost
year-long dialogue with the
Company has the Board shown
the slightest inclination toward
reaching an amicable resolution
with us”
In January 2013, the Board attempted to resolve the pending contest, and avoid the
significant time and expense of a proxy fight, by offering Sandell the
opportunity to consult with the Board in the identification and selection of
new independent candidates to be added to the Board prior to the Annual
Meeting. Sandell refused this offer Following Sandell’s nominations, the
Board publicly announced on April 28, 2014 that it would consider
the
candidates
in
connection
with
the
Board’s
nominations
for
election
–
when
Bob
Evans then sought to arrange meetings between Sandell’s nominees in a good
faith attempt to evaluate their candidacy, Sandell issued a press release
alleging that Bob Evans was attempting to “subvert”
the election process
On May 28, 2014, Sandell claimed
that the Board’s addition of three
new, highly-qualified and
independent directors to the
Board was a “knee-jerk
reactionary step”
in response to
Sandell’s nominations
In late 2012/early 2013, as part of our regular process, we reviewed and updated our
skills matrix with an independent search firm to identify board expertise
necessary to continue driving stockholder value
Subsequently, we instructed the independent search firm to seek director candidates
with specific skills and expertise identified as desirable as a result of the
skills matrix analysis, and commenced evaluating and interviewing candidates
As a result of this process, we added three highly qualified directors to the
Board with invaluable experience in hospitality and entertainment, packaged
foods and digital marketing/informational technology
On April 24, 2014, Sandell
claimed that the Board amended
the Company’s Bylaws to
enhance stockholder voice “only
after”
Sandell filed a lawsuit
The corporate governance changes announced by the Board in January to further
enfranchise stockholders went well beyond the changes sought by Sandell in
its lawsuit 10
Sandell has Misled Investors From the Beginning
Throughout his year-long campaign, Sandell has regularly distorted the truth,
overstated his claims and made unfounded allegations, a few of which are
highlighted below |
 11
Bob Evans’
Proposal for a Fresh,
Independent Board
11
of
12
are
independent
(all
but
CEO),
at
least
six
are
current
or
former
CEOs
and
at
least
eight
have other public company board service
A majority of the independent directors would have been added within the last two
years Mary Kay Haben
Former President-North America of the Wm. Wrigley Jr. Company;
Former Group Vice President and Managing Director North America of
the Wm. Wrigley Jr. Company; Former Executive of Kraft Foods Inc.
Board Member of Equity Residential and The Hershey Company
Kathleen S. Lane
Former EVP and CIO of TJX Companies, Inc.; Former Group CIO at
National Grid Plc.; Former SVP and CIO of Gillette Company (Procter
& Gamble)
Board Member of Earthlink Holdings Corp.
Larry S. McWilliams
Co-CEO of Compass Marketing; Former CEO at Keystone Foods
LLC; Former SVP at Campbell Soup Company
Board Member of Armstrong World Industries
Kevin M. Sheehan
President and CEO of Norwegian Cruise Line; Former CFO of
Norwegian Cruise Line; Former CFO of Cendant Corporation
Board Member of Norwegian Cruise Line and New Media Investment
Group, Inc.
Sandell Nominee
Sandell Nominee
Steven A. Davis, Chairman and CEO
Former President, Long John Silver’s and A&W All-American Food
Restaurants (Yum! Brands); Former SVP, Concept Development,
Pizza Hut, Inc. (Yum! Brands)
Board Member of Walgreen Co. and Marathon Petroleum Corp.
Michael J. Gasser, Lead Independent Director
Executive Chairman of the Board of Greif Inc.; Former CEO and
Chairman of the Board of Greif, Inc.
Board Member of Greif, Inc.
E.W. (Bill) Ingram III
CEO of White Castle System, Inc.; Former President of
White Castle System, Inc.
Cheryl L. Krueger
CEO of Krueger + Co., LLC; Former President and CEO and
Founder of Cheryl & Co., Inc.
Paul S. Williams
Managing Director, Major, Lindsey and Africa; Former Chief Legal
Officer and Executive Vice President, Cardinal Health, Inc.
Board Member of State Auto Financial Corp. and Compass
Minerals International, Inc.
Eileen A. Mallesch
Former SVP and CFO at Nationwide Property & Casualty Insurance;
Former SVP and CFO at Genworth Life Insurance; Former VP and
CFO at General Electric Financial Employer Services Group
Board Member of State Auto Financial Corp.
–
Director since 1993
–
Director since 1997
–
Director since 1998
–
Director since 2006
–
Director since 2007
–
Director since 2008
–
Director since 2012
–
Director since 2014
–
Director since 2014
–
Director since 2014
Note:
Board composition following 2014 annual
meeting of stockholders assuming all ten Bob Evans nominees and two of Sandell’s nominees are elected. Since the Board has nominated a slate
of ten directors for the available twelve seats at the annual meeting, the Board expects that at least
two nominees who were not nominated by the Board will be elected at the annual meeting. Selected
experience noted; please refer to the Bob Evans' investor presentation, filed on Schedule 14A with the SEC on July 31, 2014 and Bob Evans’ proxy statement for its 2014 Annual Meeting
of Stockholders, filed with the SEC on July 11, 2014, for additional background.
|
 The
Choice is Clear 12
Vote
for
Bob
Evans’
Nominees
on
the
WHITE
Card
Continue to drive profitable growth of existing
businesses
Continue to employ balanced approach to
investment and return of meaningful capital to
stockholders
Regularly and proactively review strategy;
continually engage with stockholders
Divest Bob Evans Foods now, before reaping
benefits of our transformational investments
Sell real estate, losing strategic control of assets
while burdening Bob Evans with significant and
escalating annual rents and increased leverage
Rapidly effect large leveraged share repurchase
Sustainable, Disciplined,
Responsible, Open-Minded
Unsustainable,
Not in the Best Interest of All
Stockholders
The Board structure proposed by Bob Evans would result in a fully independent Board,
except for the CEO; a majority of the independent directors would be new to
the Board since 2012; and 5 of 11 independent directors would be new to the
Board this year, including two Sandell nominees Stockholders have a clear choice between what we
believe are two very different approaches for Bob Evans’ future:
|