Bob Evans Sells Restaurants to Focus on Prepared Foods

NEW ALBANY, Ohio – The sale by Bob Evans Farms Inc. of its Bob Evans Restaurants and the acquisition of Pineland Farms Potato Co. were announced by company officials Jan. 24. The company will focus exclusively on its BEF Foods business, which is the national market share leader in refrigerated dinner dishes and sausage products in its core Midwest markets.

The new Bob Evans, further strengthened by the manufacturing and intellectual capital of Pineland, 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, officials said in a release.

The restaurants will be purchased by 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 million to $50 million. The company estimates that cash proceeds net of taxes and transaction-related costs will be $475 million to $485 million. Net cash proceeds are expected to be used to repay current indebtedness and payment of a special dividend.

As of the end of the company’s second fiscal quarter on October 28, Bob Evans Restaurants owned and operated 522 restaurants in 18 states, primarily in the Midwest, Mid-Atlantic and Southeast regions.

The definitive agreement calls for the purchase of Pineland Farms 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, officials said.

“The sale of Bob Evans Restaurants enables us to concentrate exclusively on BEF Foods, our fastest growing and most profitable segment,” explained Saed Mohseni, president and CEO of Bob Evans. “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.”

“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,” Mohseni continued. “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.”

Pineland Farms has a 900-acre potato farm surrounded by other farms with more than 55,000 acres of potatoes. The purchase, Mohseni said, is expected to greatly reduce transportation costs.

By 2020, BEF Foods’ side-dish products are expected to reach 66% of sales volume. The acquisition of Pineland mitigates the need for near-term capital spending and allows Bob Evans to focus entirely on sales and profit growth, he added.

“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,” added Josh Cohen, managing director at Golden Gate.

Mark Hood, chief finanical officer, provided fiscal year 2018 preliminary revenue and earnings before interest, taxes, depreciation and amortization of $470 million and $105 million, respectively. He added that the company expects to establish a $300 million credit facility when the transaction closes. Bob Evans will also provide transactional support services to Golden Gate for 18 to 24 months after the deal closes.

Following the closing of the Bob Evans Restaurants transaction, Mike Townsley, president of Bob Evans Foods, will assume the role of president and CEO of Bob Evans. Hood will remain in his current role and Mohseni has agreed to continue to lead Bob Evans Restaurants.

Golden Gate Capital, headquartered in San Francisco, is a private equity investment firm with more than $15 billion of capital under management. Representative restaurant/retail investments sponsored by the company include Red Lobster, California Pizza Kitchen, On The Border Mexican Grill & Cantina, Eddie Bauer, Express, Pacific Sunwear, Payless ShoeSource and Zales.

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