Bob Evans Farms Inc. directors were sued by a pension fund over claims the board improperly stripped investors of their rights to use a majority vote to amend the restaurant chain’s bylaws.
The board of Columbus, Ohio-based Bob Evans unilaterally reinstated a requirement that investors get an 80 percent supermajority shareholder vote to amend the company’s bylaws as part of an effort to help directors keep their seats, the Oklahoma Firefighters Pension & Retirement System said in a complaint filed in Delaware Chancery Court in Wilmington. Another investor is seeking support to oust directors.
“When directors of a publicly traded company take such brazen action to render themselves immune from a consent solicitation, the only logical conclusion is that they are motivated by deceit and entrenchment,” the Oklahoma fund said in the Jan. 22 complaint.
The pension fund’s case is the second to be filed in Delaware over Bob Evans directors’ decision to back the bylaw-supermajority rule. Sandell Asset Management Corp., a New York-based hedge fund that owns 6.5 percent of the 561-restaurant chain’s shares, sued Jan. 14 over the board bylaw decision.
Scott Taggart, a spokesman for Bob Evans, declined today to comment on the Oklahoma pension fund’s suit.
Sandell officials have pushed Bob Evans to spin off its food-packaging business, sell real estate and buy back shares to return cash to shareholders. Steven A. Davis, the chain’s chief executive officer, rejected Sandell’s requests in December. Sandell has said it hired a proxy solicitor while it readies a consent solicitation designed to bring in new board members.
Investors such as Sandell and the Oklahoma pension fund want to be able to change the company’s bylaws through a simple majority vote so they can make all directors stand for election at once. Directors’ terms are now staggered so that a majority of board members don’t face a vote at the same time.
Some Bob Evans shareholders have pushed for more than 15 years to have directors all stand for election at once. In 2011, shareholders met the 80 percent requirement to change the company’s bylaws to have a single board election and to wipe out the supermajority rule for such changes.
Later that year, the board overrode those changes without any explanation, according to the Oklahoma pension fund’s complaint.
The directors’ reinstatement of the supermajority rule for bylaw changes is “unreasonable and invalid” and the pension fund are asking a judge to rule the change is “unenforceable,” according to the suit.
Bob Evans has been a takeover target in the past as funds such as Advent International Corp., Ares Management LLC and Apollo Global Management LLC expressed interest in acquiring the chain in 2012, according to news reports.
The case is Oklahoma Firefighters Pension & Retirement System v. Davis, CA No. 9271, Delaware Chancery Court (Wilmington).