Trian Fund Management, the activist hedge fund led by billionaire investor Nelson Peltz, has offered to take Wendy’s private in a deal that values the fast-food chain at roughly $1.4 billion.
Trian and its partners offered to acquire all Wendy’s shares they do not already own for $7.35 each in cash, according to a regulatory filing on Oct. 28. The price represents a roughly 20 percent premium to Wendy’s closing share price on Oct. 27.
Trian currently owns about 16.3 percent of Wendy’s outstanding shares. Restaurant operator Flynn Group and investment firms BlueFive Capital and Sixth Street Partners are working with Trian on the proposed acquisition.
The investor group said the transaction would not require new debt and would not be conditional on obtaining financing.
The proposal is nonbinding and still requires approval from Wendy’s board. Trian said it expects a special committee of independent directors to evaluate the offer.
In a letter to the burger chain’s board of directors, Peltz said it will be better off pursuing its turnaround strategy as a private company.
“Wendy’s sits at a critical juncture,” Peltz wrote in the letter, pointing to pressure on U.S. consumers, economic uncertainty, commodity inflation, growing competition in the burger market, and the significant amount of investment needed to reduce debt.
Going private, he said, would give the company more time to deal with those challenges without the pressure of meeting short-term expectations from public-market investors.
Wendy’s has declined to comment.
The offer comes after Wendy’s posted a weak second quarter. Its global systemwide sales declined 6.5 percent to about $3.4 billion, with U.S. same-restaurant sales falling 7 percent from a year earlier.
Wendy’s reported quarterly revenue of $570.6 million, up 1.7 percent. Its operating profit, however, fell 24 percent to $79.3 million, while net income dropped more than 40 percent to $32.6 million.
The restaurant count has also been shrinking in the United States. Wendy’s ended the second quarter with 5,724 U.S. restaurants, down from 5,967 a year earlier, as closures outpaced openings.
In August, the company withdrew its full-year financial outlook as its new leadership began developing a multi-year turnaround plan. It also cut its annualized dividend to 28 cents per share to preserve cash for the effort.
Peltz argued that those challenges make a long-term restructuring more difficult as a publicly traded company.
“We believe private ownership is the better path and provides the patient, long-duration capital needed to restore the business and the franchise system to a position of strength,” he wrote.
The proposed takeover would deepen a relationship between Peltz and Wendy’s that stretches back more than two decades.
Trian began investing in Wendy’s in 2005 and pushed the company to make strategic changes. Wendy’s agreed the following year to add three Trian-backed directors to its board.
In 2008, Wendy’s merged with Triarc Companies, the Peltz-controlled owner of Arby’s, in a transaction valued at about $2.3 billion. Peltz joined Wendy’s board that year and has since remained closely involved with the company.
Trian has also taken prominent stakes in companies including Procter & Gamble, Mondelez, Unilever, and Disney.
