Bob Evans Farms is selling its restaurant division to private-equity giant Golden Gate Capital for $565 million to focus on its faster-growing packaged foods business.
The company’s stock jumped more than 20% Wednesday on news of the sale of the 523-unit chain of family dining eateries in the nation’s heartland. Bob Evans Farms will remain public as it expands its BEF Foods division, which sells refrigerated side dishes to supermarkets.
“We’ve evaluated this process for many months. What we concluded was: sell the most mature part of business, take the money and invest it in the part of company that is fastest growing and has the highest margin of profitability,” Bob Evans CEO Saed Mohseni told Forbes.
As part of that investment, Bob Evans will acquire Pineland Farms Potato for $115 million, giving the packaged-foods division additional capacity and proximity to markets in the Northeast. The Pineland deal will add shredded and cubed potato products to BEF Foods’ portfolio.
According to Forbes, the deals “come at a moment of tension for the restaurant industry as a whole: traffic and sales have been under pressure as consumers have shifted to eating more food at home, and heightened labor costs have been eating into restaurant margins.”
“For Bob Evans in particular, these trends have manifested in slowing same-stores for the restaurant segment of the business as BEF Foods, the packaged foods division, has posted double-digit volume growth,” Forbes added.
Thomas Sandell, an activist investor who has been pushing Bob Evans for years to split up, welcomed the sale of the restaurants.
“It enables Bob Evans to focus exclusively on realizing the full potential of its market-leading Bob Evans Farms Foods business segment,” he said in a news release.
Golden Gate’s other assets include the Red Lobster and California Pizza Kitchen chains. “They have experience in restaurant and retail … they’re experienced in iconic brand ownership, we felt that they would make a great partner for us,” said Mohseni, who will continue as CEO of the restaurant unit.