Bob Evans Sued Over $1.5B Merger
A shareholder in Bob Evans Inc. on Tuesday filed a proposed class action accusing the company and its board of misleading investors earlier this month in order to secure support for a planned $1.5 billion merger with packaged goods company Post Holdings Inc.
October 31, 2017 at 05:09 PM
7 minute read
A shareholder in Bob Evans Inc. on Tuesday filed a proposed class action accusing the company and its board of misleading investors earlier this month in order to secure support for a planned $1.5 billion merger with packaged goods company Post Holdings Inc.
In a 22-page complaint, shareholder David Miller said that Bob Evans' directors had omitted important accounting information from an Oct. 24 proxy statement detailing the frozen sausage-maker's $77 per share proposed sale to Post, which the companies announced last month. The “false and misleading” disclosures, Miller said, failed to reconcile non-GAAP projections with generally accepted accounting principles, violating U.S. securities laws, and caused investors to believe the company was worth less than its actual value.
He asked that an upcoming shareholder vote to ratify the deal be tabled until the alleged deficiencies are addressed.
“In sum, it appears that Bob Evans is well-positioned for financial growth, and that the merger consideration fails to adequately compensate the company's shareholders,” Miller's Faruqi & Faruqi attorneys wrote in the filing.
“It is imperative that defendants disclose the material information they have omitted from the proxy … so that the company's shareholders can properly assess the fairness of the merger consideration for themselves and make an informed decision concerning whether or not to vote in favor of the proposed merger,” the filing said.
Miller argued that Bob Evans' financial performance has improved in recent months after the company sold off the restaurant portion of its business to private equity firm Golden Gate Capital back in January. Miller said the company had an average price target of almost $80, and a high price of $85, when it agreed to the sale.
Among the 11 directors named in Miller's complaint was Charles M. Elson, the only Bob Evans board member to vote against the deal. Elson, a professor of corporate governance at the University of Delaware, joined the board in 2014 after a proxy fight won activist-investor Thomas Sandell four seats on the Bob Evans board.
According to the proxy statement, Elson “was not convinced the merger consideration was greater than the value that could be realized through the continued execution of Bob Evans' current strategic plan and/or through a sales process initiated after the passage of more time following the Bob Evans Restaurants transaction, and that the quality of the board's process leading up to the merger did not convince him otherwise.”
Elson made his views known at multiple board meetings, but the directors still voted Sept. 18 to finalize the merger agreement, according to the proxy.
Elson did not return a call seeking comment on the suit and his opposition to the deal.
Post and Bob Evans announced the proposed merger in a Sept. 19 press release, calling the deal a “highly complementary combination” that would expand the reach of both companies.
“This transaction creates enhanced and certain value for our stockholders, while providing further resources and reach to deliver the Bob Evans experience to a broader audience of consumers and retailers,” Mike Townsley, Bob Evans president and CEO said in a statement at the time.
A spokeswoman for the company did not return a call Tuesday seeking comment on the lawsuit.
Miller is represented by Michael Van Gorder, Nadeem Faruqi and James M. Wilson of Faruqi & Faruqi.
An online docket-tracking service did not list counsel for Bob Evans and its directors on Tuesday.
The case is captioned Miller v. Bob Evans Farms.
A shareholder in Bob Evans Inc. on Tuesday filed a proposed class action accusing the company and its board of misleading investors earlier this month in order to secure support for a planned $1.5 billion merger with packaged goods company
In a 22-page complaint, shareholder
He asked that an upcoming shareholder vote to ratify the deal be tabled until the alleged deficiencies are addressed.
“In sum, it appears that Bob Evans is well-positioned for financial growth, and that the merger consideration fails to adequately compensate the company's shareholders,” Miller's
“It is imperative that defendants disclose the material information they have omitted from the proxy … so that the company's shareholders can properly assess the fairness of the merger consideration for themselves and make an informed decision concerning whether or not to vote in favor of the proposed merger,” the filing said.
Miller argued that Bob Evans' financial performance has improved in recent months after the company sold off the restaurant portion of its business to private equity firm Golden Gate Capital back in January. Miller said the company had an average price target of almost $80, and a high price of $85, when it agreed to the sale.
Among the 11 directors named in Miller's complaint was Charles M. Elson, the only Bob Evans board member to vote against the deal. Elson, a professor of corporate governance at the University of Delaware, joined the board in 2014 after a proxy fight won activist-investor Thomas Sandell four seats on the Bob Evans board.
According to the proxy statement, Elson “was not convinced the merger consideration was greater than the value that could be realized through the continued execution of Bob Evans' current strategic plan and/or through a sales process initiated after the passage of more time following the Bob Evans Restaurants transaction, and that the quality of the board's process leading up to the merger did not convince him otherwise.”
Elson made his views known at multiple board meetings, but the directors still voted Sept. 18 to finalize the merger agreement, according to the proxy.
Elson did not return a call seeking comment on the suit and his opposition to the deal.
Post and Bob Evans announced the proposed merger in a Sept. 19 press release, calling the deal a “highly complementary combination” that would expand the reach of both companies.
“This transaction creates enhanced and certain value for our stockholders, while providing further resources and reach to deliver the Bob Evans experience to a broader audience of consumers and retailers,” Mike Townsley, Bob Evans president and CEO said in a statement at the time.
A spokeswoman for the company did not return a call Tuesday seeking comment on the lawsuit.
Miller is represented by Michael Van Gorder, Nadeem Faruqi and James M. Wilson of
An online docket-tracking service did not list counsel for Bob Evans and its directors on Tuesday.
The case is captioned Miller v. Bob Evans Farms.
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