Dive Brief:
- The board-investor tussle at Bob Evans Farms demonstrates the delicate relationships food and beverage manufacturers can have with activist investors.
- Thomas Sandell's firm Sandell Asset Management Corp. currently holds almost 7% of Bob Evans shares, and Sandell has been pushing the board to spin off the packaged foods business from the restaurant chain business. Sandell appointed several of these board members after winning a proxy fight in 2014, but the board continues to stop Sandell's attempts.
- Sandell argues the packaged foods unit is growing profits and could benefit shareholders two times: once at the time of the spinoff and once at the time of the standalone business' sale. The board, however, is concerned that the business is too small to stand alone and that a spinoff business could create tax burdens.
Dive Insight:
Skirmishes between activist shareholders and company executives and board members are nothing new to the food and beverage industry. But rarely is one so public, especially when the investment fund aided in retooling the board, Suraj Srinivasan, a Harvard Business School professor, told The Wall Street Journal.
Last year, Mondelez was at the center of activist investors' attention when Bill Ackman announced his $5.5 billion stake in the company in August. Ackman immediately started putting pressure on Mondelez to cut costs even more than it already had. In December, Mondelez CEO Irene Rosenfeld acknowledged that she had been fielding investors' feedback but had remained focused on "successfully running Mondelez for all shareholders — without the activists' help."
But activist investors can give sound advice that lead to better profits for a company. Activist investor Jana Partners pushed ConAgra last June to divest its underperforming private label business. Not long after, ConAgra took the firm's advice and announced it would sell the unit to TreeHouse Foods in November. Having the fresh perspective of an outside investor can enable executives to view underperforming parts of a company in a new light and encourage management to take action.