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Farm favorite whets Cramer's appetite for value

(Click for video linked to a searchable transcript of this Mad Money segment)

Jim Cramer has quite an appetite for value. And he's just discovered a mouth-watering new idea.

It's Bob Evans, the company behind a chain of restaurants of the same name as well as homestyle refrigerated foods. "And make no mistake," said Cramer, "I do think Bob Evans is is a real value here."

Elena Elisseeva | Hemera / 360 | Getty Images

The catalyst, however, involves management unlocking value through a spinoff, specifically through the sale of its packaged goods business.

Considering the bidding war for Hillshire Brands, Cramer said, "yes, I do believe that the food segment of Bob Evans Farms would attract suitors."

Whether it's Pilgrim's Pride, the company that lost the bidding war for Hillshire to Tyson, or another company such as ConAgra, Hormel or Pinnacle Foods, Cramer believes interest would be significant.

"And if you assume that the Bob Evans packaged food business gets the same kind of valuation as Hillshire, that would make it worth nearly $600 million. Considering that Bob Evans has a $1.2 billion market cap, currently, and the food side only accounts for 30% of its business, that's a terrific valuation," Cramer said.

But that's not the only value Cramer sees. He also says if management wanted to be very aggressive, they could sell the restaurant business. And if it were to receive a similar valuation as rival Red Lobster, which Darden sold last month to private equity, Cramer says it would be worth $1.1 billion.

"Put both of them together, and the sum of the parts could be worth $1.7 billion, which translates into $65 per share. That's 36% higher than where the stock's currently trading."

Of course, Cramer realizes the idea probably seems like a slice of Bob Evan's apple pie in the sky. Without any reason to break apart, would management even consider the possibilities?

What you might not know is that there's a powerful activist hedge fund agitating for these very changes. "These activists have nominated 8 potential new board members who will likely be voted on later this summer, and if they win some of these seats on the board of directors, that would make a potential break-up a lot more likely," Cramer said.

Because of these developments, Jim Cramer believes Bob Evans is a buy, however he also says it's important to establish a new position strategically.

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"Bob Evans reports next Tuesday and I have no reason to think the quarter will be anything but bad. So keep your powder dry, and if you get a chance to buy this stock into weakness next week, I say take it. Ultimately, I can see management surrendering to the activists and agreeing to sell or spin off its packaged food business. The remaining restaurant business could then focus on turning itself around or selling itself, either way I think this one's a longer-term winner."

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