Golden Gate Capital to pay $565m for Bob Evans Restaurants

An affiliate of Golden Gate Capital has entered into a definitive agreement to purchase Bob Evans Farms’ restaurant business for $565 million plus the assumption of net working capital liabilities estimated between $40 million and $50 million.

Josh Cohen, managing director of the San Francisco-based private equity firm, which has over $15 billion of capital under management, noted in a statement that his firm will provide Bob Evans Restaurants with “increased flexibility and resources to grow the company for the long-term.”

Bob Evans estimates cash proceeds, net of taxes and transaction-related costs, of between $475 million to $485 million. These are expected to be used to repay current indebtedness and payment of a special dividend, according to the joint statement.

Bob Evans also announced a definitive agreement to acquire Pineland Farms Potato Company (PFPC) for $115 million, which it said may be increased by up to $25 million if certain financial metrics are achieved one year after closing.

The deals position Bob Evans to focus exclusively on the growth of its BEF Foods business, a market leader in refrigerated dinner side dishes and sausage products and its “fastest growing and most profitable segment.” The company said it will establish a $300 million credit facility at the time of the transaction closings – expected 28 April – to help do so.

“As a more focused private business, Bob Evans Restaurants will be better able to deliver on its brand promise of providing quality food and hospitality to every guest at every meal,” added Bob Evans president and chief executive Saed Mohseni. “We believe our talented restaurant teams, combined with Golden Gate Capital’s industry expertise and significant resources, positions Bob Evans Restaurants well for realizing its full potential.”

The company expects earnings per share to be in the range of $2.15 to $2.30 during the fiscal year 2017. Its board will declare a special dividend of approximately $150 million ($7.50 per share) within 60 days following the transaction’s close; and increase the existing share repurchase authorization to $100 million through 2017. The firm anticipates the continuation of quarterly dividend payments, currently at $0.34 per share; and providing fiscal year 2018 preliminary revenue and EBITDA targets of $470 million and $105 million, respectively.

Golden Gate Capital did not respond to requests for additional comment in time for publication.