Coverage: Bob Evans sells restaurants as activist investor wins

Bob Evans Restaurants, which has 523 locations across the country, agreed to sell its restaurants and focus on its food distribution business, bowing to pressure from an activist investor.

Chris Woodyard of USA Today has the news:

Bob Evans Restaurants, based in New Albany, Ohio, will be taken private in a sale to a private equity firm. The company, however, will remain public as it expands its BEF Foods division, which has a big stake in refrigerated side dishes sold in supermarkets, especially mashed potatoes and sausages.

“The steps we took today are the transformation of Bob Evans,” said CEO Saed Mohseni in an interview. The two businesses “were founded together, but now that they both have scale…it’s time to separate them.”

Mohseni said he plans to continue to head Bob Evans Restaurants, which were sold to an affiliate of Golden Gate Capital for $565 million and assumption of up to $50 million in liabilities.

As part of the deal, proceeds will be used to pay down debt and for a special dividend amounting to $150 million, or about $7.50 a share, after the sale closes.

John Kell of Fortune focused on activist investor Thomas Sandell, who wanted the company split in two:

Golden Gate is taking on a second fixer upper with this deal — it paid Olive Garden operator Darden Restaurants $2.1 billion for casual-dining peer Red Lobster back in 2014.

Sandell had called for the split for years. Sandell’s vision was for Bob Evans to spin-off the packaged foods business. While the deal isn’t structured the way Sandell envisioned it, Bob Evans is heeding the call to break apart the assets and shares are ultimately rising because of those strategic moves.

Sandell’s firm didn’t immediately respond to an e-mail requesting comment.

Restaurant companies can make ripe targets for activists, as most are tiny by market-cap standards so amassing a sizable stake doesn’t cost too much. Buffalo Wild Wings and Chipotle Mexican Grill have both seen activist investors jump into their stocks in recent months.

Doug Buchanan of Columbus Business First reports that Bob Evans food division is buying another company:

In a separate deal also revealed Tuesday, Bob Evans will pay $115 million to acquire Pineland Farms Potato Co. based in Mars Hill, Maine.

The deals are expected to close before the end of April.

The company said the acquisition “provides capability to produce and sell diced and shredded potato products in both the retail and foodservice channels.” It also gets another potato processing facility with up to 180 million pounds of capacity, a 900-acre potato farm and an additional 55,000 acres of annual potato production.

“The sale of Bob Evans Restaurants enables us to concentrate exclusively on BEF Foods, our fastest growing and most profitable segment,” Mohseni said in the release. “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.”