Bob Evans Investors Urge Asset Sales to Fund Food Products

Bob Evans Farms Inc., owner of the namesake family-restaurant chain, should sell land and buildings to free up cash for its food-products business, share buybacks and dividends, two investors said in a letter.

“Bob Evans has substantial value in its real estate holdings that is not reflected in the current share price,” New York-based shareholders G Asset Management and Capstone Equities Capital Management LLC wrote Bob Evans management on Sept. 16.

The company could sell its properties and then rent them back in an arrangement called a sale-leaseback, Michael Glickstein, the president of G Asset Management, said in a telephone interview.

“With such value in the real estate, there are multiple ways that can be explored to unlock that,” he said.

Bob Evans, based in Columbus, Ohio, had $1.68 billion in plant, property and equipment as of July 29, according to a filing with the U.S. Securities and Exchange Commission. Chief Executive Officer Steven Davis has sought to expand the company’s food-products segment, which makes sausage and side dishes for retailers, as restaurant sales declined for three straight years.

David Poplar, a Bob Evans spokesman, didn’t immediately return a phone message and e-mail seeking comment.

Bob Evans rose 19 cents to $29.89 at 4:30 p.m. New York time in Nasdaq Stock Market composite trading. The shares have slumped 9.3 percent this year, compared with a 17 percent gain for the Standard & Poor’s 500 Restaurant Index.

Real Estate Holdings

The company owned the real estate for 486 Bob Evans’ restaurants and leased it for 77 as of the end of fiscal 2011, according to a filing in June. The company leased the real estate for 138 of its 145 Mimi’s Cafe locations and also owned manufacturing plants and a distribution center for its food-products business.

“Should the opportunity arise for us to use our real estate portfolio to fund a profitable growth initiative, we would certainly be open to exploring that option,” Davis said on a conference call in August.

Capstone owned 2,920 shares of Bob Evans as of April 30, according to Bloomberg data. G Asset also owns shares through a broker, Glickstein said, while declining to say how many.

“We have identified a private REIT in the triple net space interested in making an offer on a portfolio of stores,” the investors said in the letter.

G Asset Management and Capstone also recommended hiring an investment bank to explore options related to property and adding someone with real estate expertise to the board.

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