BL: Peltz's Trian Says Wendy's Spurned Acquisition Offers (Update5)
By Kevin Bell and Josh Fineman
April 18 (Bloomberg) -- Nelson Peltz's Trian Fund Management LP said Wendy's International Inc., the hamburger chain that put itself up for sale last year, rejected two acquisition bids from the investment firm.
Trian and its Triarc Cos. affiliate proposed to combine the Arby's restaurant chain with Wendy's, and separately offered to buy the company for $900 million in cash and the balance in stock, Trian President Peter May said in a letter to Wendy's Chairman James Pickett that was part of a regulatory filing today.
The bids were rejected because of their ``inadequacy,'' Pickett said in a separate response.
Trian, which controls a 9.8 percent stake, plans to contact shareholders to call a meeting on the future direction of the company after the board rejected the firms' proposals, May wrote in the letter dated today. Wendy's said April 3 that sales at stores open at least 15 months dropped for the second straight quarter as McDonald's Corp. and Burger King Holdings Inc. lured more customers.
``It is now time for Wendy's shareholders to decide the future of their company,'' May wrote. ``Our most recent proposals were summarily rejected in less than 24 hours.''
The offers were given appropriate consideration, Pickett said in a letter to May also dated today.
``The timing of the rejection of your latest proposals is attributable to their inadequacy,'' he wrote.
Wendy's Shares
Wendy's rose 28 cents, or 1.1 percent, to $25.38 by 4:03 p.m. in New York Stock Exchange composite trading. The chain has declined 22 percent since deciding to consider a sale, while McDonald's has climbed 20 percent.
``From a shareholder perspective, they're better off if Peltz goes away and let's them get on with running the business,'' said Malcolm Knapp, a New York-based restaurant consultant. Peltz has distracted Wendy's management from turning around the business while alienating franchisees, he said.
``Wendy's franchisees do not want anything to do with Peltz, and they view Arby's as a competitor,'' Knapp said. ``Peltz is going to do his thing and try to win, but there is not a lot of sentiment on his side.''
Peltz has pressured the chain to sell itself after it underperformed competitors. Wendy's board appointed a committee last April to explore a possible sale after the company spun off its Tim Hortons coffee-and-doughnut division, the biggest driver of its profit in recent years.
`Current Direction'
``Trian is very concerned about the current direction of Wendy's,'' May said in the letter. If the chain decides to consider an alternative to a sale, such as a sale of a minority stake, May urged that shareholders be allowed to vote on an agreement rather than leave it in the hands of the committee.
Triarc, the owner of the Arby's fast-food chain, offered to buy Wendy's last year. Triarc, based in Atlanta, said in November that it made an offer that was less than $3.2 billion.
In February, Peltz said he plans to nominate six candidates to the company's board.
Pickett said Jan. 28 that the strategic review ``is in the final stages.'' Turmoil in the financial markets, resulting in tightening credit, delayed the sale process, he said.
In his letter today, Pickett questioned the value of the proposal to combine Wendy's and Arby's.
``The value you ascribed to Wendy's in such a proposal was significantly below a level we had previously told you very clearly would be unacceptable,'' Pickett wrote.
Acquisition `Unlikely'
The second proposal, to acquire Wendy's for cash and stock, may mean that ``outright acquisition is unlikely given the current financing environment,'' John Glass, an analyst with Morgan Stanley, said in a note today to clients. ``We can understand why a stock deal from such a small company would be viewed as inherently unattractive, as it is essentially Wendy's buying itself.''
Revenue slumped at Wendy's following the death of founder Dave Thomas in January 2002, with sales at older stores dropping six quarters in a row before former Chief Executive Officer Jack Schuessler resigned in April 2006. He was replaced by Kerrii Anderson.
Pickett said the committee's recommendation on Wendy's would come ``in the very near future.''
Wendy's expects to report first-quarter results on April 25.
To contact the reporter on this story: Kevin Bell in Toronto at kbell2@bloomberg.net; Josh Fineman in New York at jfineman@bloomberg.net
Last Updated: April 18, 2008 16:12 EDT
