The hedge fund Sandell Asset Management is bringing out the big guns.
After two foiled attempts to pressure the board of Bob Evans Farms to make changes to its restaurant and packaged goods business, Sandell is taking the matter to court. On Tuesday the hedge fund filed a suit against Bob Evans, accusing the board of attempting to strip shareholders of their rights.
Sandell owns a 6.5 percent stake in Bob Evans, which runs 561 restaurants across the U.S. and produces packaged foods like bacon, ham and sausages.
For more than three months, Sandell has been calling for the board of directors to consider three changes to the business: spinning off its food business, selling some of its real estate to lease back and returning money to shareholders through a share buyback.
But in December, Bob Evans’s chief executive and chairman, Steven A. Davis, broadly rejected the recommendations, telling analysts on a conference call that the company would not undertake what he called “financial engineering tactics that place our company’s ability to deliver long-term shareholder value at unnecessary risks.â€
Bob Evans, based in New Albany, Ohio, has maintained that keeping its food packaging business and restaurant chain together is good for the overall business, and so is holding on to its real estate.
As a result, Sandell is now applying a little more pressure. In addition to the lawsuit, its chief executive, Thomas Sandell, is expected to publicly accuse the board of cronyism and irresponsible spending habits, according to someone familiar with Mr. Sandell’s thinking.
The hedge fund has raised a number of concerns about the company’s management, including that five of the ten directors at Bob Evans have served on the board for 15 years or more.
Through the complaint, which was filed in a Delaware court, Sandell is seeking to strike down the company’s requirement that a so-called supermajority of 80 percent or more of shareholder approval is necessary for shareholders to amend any bylaws. Sandell contends that the supermajority clause goes against shareholders’ wishes and is requesting a simple majority.
Separately, Sandell has pursued a consent solicitation, which would allow investors to vote on proposed changes without having to wait until the next shareholder meeting.
The hedge fund, which is currently the third biggest shareholder in Bob Evans, has previously said that Bob Evans’ share price is worth $80 a share, significantly more than its current price of $47.62.
