Bob Evans buys Pineland Farms Potato Co.

PHOTO / Tim Greenway Rodney McCrum, president and COO of Pineland Farms Potato Co., in the packaging area of the new facility in Mars Hill. The company, which McCrum founded with other Aroostook potato farmers, has just been purchased by a division of Bob Evans for $115 million.

File Photo / Tim Greenway Bill Haggett, Pineland Farms' CEO, has proven himself to be an adept chief executive by expanding his product offerings. He's pictured at the Pineland facility in New Gloucester.

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By James McCarthy

BEF Foods, a division of Bob Evans Farms Inc. (NASDAQ:BOBE), is buying Pineland Farms Potato Co. in Mars Hill for $115 million.

The acquisition coincides with Bob Evans Farms’ decision to sell its national chain of restaurants to Golden Gate Capital for $565 million and focus on driving growth of its food division, BEF Foods. Both the sale of the restaurants and the acquisition of Pineland Farms Potato Co. are expected to close by April 28.

“I think this is the most exciting news for Pineland Farms and for Mars Hill in a long, long time — and we’ve had a lot of exciting news up here in recent years,” said Rodney McCrum, a founder, president and chief operating officer of Pineland Farms Potato Co. “I’m staying on as president, my whole team is staying on. I think this is going to take us to the next level that we couldn’t reach on our own.”

McCrum said he met with employees at 4 p.m. Tuesday to tell them the news and to reassure them that the new owners were committed to the long-term growth of Pineland Farms Potato Co.

“I assured them that this is going to help grow our company even more,” McCrum said. “I think the best is yet to come. We took it as far as we could. … I think this is good news for northern Maine.”

McCrum, who’s played an integral role in the company’s double-digit growth since its repurchase in 2010, was the 2016 Mainebiz “Business Leader of the Year” in the large company category. “I’m not ready to sit under a palm tree yet,” he said in a telephone interview this morning. “This movie isn’t over. The movie just got extended for another hour.”

Expanded capacity for growth

In a telephone interview with Mainebiz this morning, William Haggett, chairman and CEO of Pineland Farms Potato Co., said Bob Evans’ purchase strengthens the Mars Hill company’s long-term prospects for continued growth that will benefit its almost 200 employees, dozens of potato growers in Aroostook County, its national restaurant and retail customers and, in general, the economy of northern Maine.

“They are obviously a much larger organization that Pineland Farms Potato Co.,” Haggett said. “Their financial resources are substantially greater than ours. They are truly a national company with a scope that’s much greater: We have national customers, but our primary focus has been on customers that are east of the Mississippi River.”

Haggett said Pineland Farms Potato’s 2016 sales were in the range of $50 million to $60 million.

The company, which was repurchased by the Libra Foundation and a group of investors in 2010, has made significant investments in expanding the Mars Hill plant the past six years, resulting in a 125,000 square foot manufacturing facility that has tripled its production capacity and reduced operating costs with state-of-the-art equipment.

Haggett said the company today ranks among the most efficient refrigerated potato producers in the United States, purchasing more than 100 million pounds of Maine-grown potatoes annually. With its expanded production capacity coming online this spring, Haggett says the Mars Hill facility will have the capacity to handle up to 180 million pounds of potatoes annually.

“That means we’ll be buying nearly twice as many potatoes from the local growers,” Haggett said, adding that the ripple-effect economic benefits will extend to truckers, seed potato suppliers and other local businesses.

Haggett said Bob Evans plans to retain the “Pineland Farms” brand, which he characterized as “an important part of the acquisition.”

“They have been Pineland Farms’ lead customer the last several years,” he said. “They lack some of the capabilities that we possess. By acquiring us, they acquire the capability to produce and sell diced and shredded potato products.”

What Bob Evans gets from the deal

In a release posted on the company’s website, Bob Evans President and CEO Saed Mohseni said selling the restaurants to focus on its BEF Foods business is a “major step in our strategic transformation that we believe will continue Bob Evans’ history of success.”

“The sale of Bob Evans Restaurants enables us to concentrate exclusively on BEF Foods, our fastest growing and most profitable segment,” he said in the release. “We believe this focus will result in higher returns for our shareholders.”

Mohseni said the acquisition of the Mars Hill company included a 900-acre potato farm that is surrounded by an additional 55,000-plus acres of annual potato production. “Its close proximity to tens of thousands of acres of potato production is particularly attractive, as it greatly reduces transportation costs,” he said. “The Pineland Farms Potato Co. acquisition mitigates the need for near-term capital spending for additional capacity to meet our growth targets.”

Libra Foundation to stay on as advisers

Craig Denekas, CEO and chairman of the Libra Foundation, the principal investor in the Mars Hill company, credited McCrum, his team and the Aroostook County suppliers with creating a strong brand that was seen by Bob Evans as a good investment.

“They are the ones who made this all happen,” he said. “The unparalleled quality of the products speaks for itself and the rest of the industry has come to recognize it.”

In a telephone interview with Mainebiz this morning, Denekas said the purchase agreement with Bob Evans includes an “earnout” clause that will enable investors to earn an additional return if Pineland Farms Potato Co. achieves certain financial goals over two years following the closing.

Denekas and Libra President and COO Jere Michelson will stay on in an advisory role to Bob Evans for a transition period of up to two years.

Denekas said the acquisition has no effect on the continuing operations of Pineland Farms natural meats company, its cheese operations or the Pineland Farms business real estate and farm campuses in New Gloucester and Gray.