Sources: Bob Evans may explore sale of Mimi's Café

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Bob Evans Farms Inc. is looking to sell the Mimi’s Café casual-dining chain, according to a recent report in online finance journal dealReporter.

A Wall Street securities analyst and a source involved in restaurant industry merger-and-acquisition activity, who both asked not to be named because they were not authorized to speak for Bob Evans or Mimi’s, told Nation’s Restaurant News they believe Mimi’s has been shopped on and off by Bob Evans for a year or more. A renewed sales effort at this time may be a result of last week’s successful sale of the Yard House casual-dining chain to Darden Restaurants Inc.

The dealReporter, which sent its story to Nation’s Restaurant News, but does not make its subscriber content available online, said their unnamed sources expect a sale multiple of around seven times Mimi’s earnings before interest, taxes, depreciation and amortization, or EBITDA. The article also said private equity firms are the primary suitors.

A spokeswoman for the Columbus, Ohio-based Bob Evans told Nation’s Restaurant News the company does not comment on rumors.

According to securities analyst Chris O’Cull at Keybanc Capital Markets, Mimi’s booked fiscal 2012 EBITDA of $24.5 million. There is a case for Bob Evans to sell Mimi’s, he said, in a July research note.

“The long-struggling Mimi’s Café concept has only produced positive [same-store sales] once in the past 60 months; we estimate cumulative guest counts are down roughly 35 percent over the past four years as average unit volume has fallen from $3.3 million to $2.5 million,” O’Cull stated. “We believe a Mimi’s turnaround would require store closures, additional capital to refurbish existing stores and the buildout of under-penetrated markets (88 units are spread across 23 states).”

O’Cull noted that a private equity firm is the most likely candidate, and a deal may fetch about $110 million.

“The likely buyer of Mimi’s is a private equity firm that owns other brands that could use Mimi’s real estate for conversions,” O’Cull stated. “Based on our analysis, we believe a firm could pay roughly $110 million (or 4.5x FY12 EBITDA of $24.5 million) and earn a mid-teens [internal rate of return].”

Keybanc’s O’Cull initiated coverage of Bob Evans this month with a Hold rating.

Irvine, Calif.-based Mimi’s Café was acquired by Bob Evans in 2004 for a reported $103 million, in a deal that included the assumption of about $79 million in debt.

The chain was founded in 1978 by Thomas Simms, whose restaurateur father Arthur Simms was inspired by French cafes while serving as an airman during World War II. Mimi was the name of a French woman who captured the elder Simms’ affections.

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