| Sandell Asset Management founder Thomas Sandell |
Earlier this week a hedge fund manager disclosed a sizable stake in Bob Evans Farms and recommended a series of actions to lift its stock price. But the man behind the headlines was not one of the usual six or eight activist suspects.
Rather, it was an old name that has seemingly faded from the public consciousness — Thomas Sandell of New York–based Sandell Asset Management Corp. Although the 52-year-old has been running his hedge fund firm for 15 years, he has kept a somewhat low profile in recent years. That will happen when your firm’s assets dwindle to just $850 million from a peak of $7.5 billion, which Sandell managed in 2008. That was before he lost 30 percent in the global market meltdown later that year and investors yanked more than 50 percent of their assets out of his funds.
But Sandell’s low profile is also down to his being comparatively quiet, at least for an activist investor. Sandell, who has waged 15 activist campaigns since 2005, does not host three-hour public lectures on his portfolio positions, nor does he fire off incendiary messages to management or debate his enemies on cable television.
In fact, he has been involved with only one proxy fight over the years. In 2006 he teamed up for an activist battle with Nelson Peltz’s Trian Partners, which played the more public role of seeking five nominees for the board of food giant H.J. Heinz Co. and pushing for a series of actions. Sandell and Trian secured only two seats, but Heinz subsequently implemented a number of changes that the investor group was urging.
Last year, Sandell’s best gain came from chemicals maker TPC Group, whose stock soared after it agreed to be acquired by an investment group. Sandell made 70 percent on the position. As for his other current positions, Sandell is now urging Spectra Energy Corp. to sell more assets than what it has agreed to sell to its master limited partnership, Spectra Energy Partners. Sandell also took an activist position in Compuware Corp. before the business software maker rejected a takeover offer from Paul Singer’s Elliott Management earlier this year.
Sandell says he has enjoyed a 67 percent average annualized return over the past decade on his activist situations — though he doesn’t care for the term “activist.” “We prefer constructive dialogue,” Sandell tells Alpha.
In any case, when Sandell disclosed his 5.1 percent stake in Bob Evans Farms earlier this week, he sent a letter to the company’s board of directors urging it to take several steps to boost the stock price, and he elaborated on his detailed plan in a white paper. Essentially, he wants the company to spin off its food products business and execute a sale-leaseback of the real estate underlying 482 of the company’s total 560 restaurants that it owns. He then wants the company to use about $1 billion in what he estimates would be the after-tax gain from selling its BEF Foods business and completing a sale-leaseback of its restaurant properties to buy back stock. Sandell estimates the Bob Evans stock is worth between $73 and $84 per share. In response to Sandell’s public pronouncement, the company said succinctly, “We welcome our shareholders expressing their views to us, and we take into consideration their concerns and suggestions.”
Sandell says he took the unusual step of making his food fight public when management essentially blew him off. “They were totally complacent,” he says. “They didn’t seem to take us seriously.”
Sandell, born and raised in Sweden, earned a BS in international business administration and economics from Uppsala University in Sweden before joining Atlantic Finance in Paris as a securities analyst in 1986. He eventually joined Bear Stearns in 1989 to create the proprietary international risk arbitrage operation. Sandell, who also earned an MBA in finance from Columbia Business School, left Bear in 1997 as a senior managing director and co-head of the risk arbitrage department.
Sandell’s flagship fund is Castlerigg Master Investments, which the firm calls a multistrategy fund. It was up 15.5 percent in 2012. In January 2010 the firm launched the Castlerigg Merger Arbitrage and Equity Event Fund, which mostly invests in announced mergers and takeovers. This year it debuted the Castlerigg Global Equity Special Event Fund after introducing the Castlerigg Active Investment Fund last November. The firm also offers the Castlerigg UCITs fund. About two years ago Sandell also hired a new team of marketers, who are seeking more stable institutional investors for the firm’s funds.
