Triarc to acquire Wendy's for $2.4b, merge it with Arby's
NEW YORK - Billionaire Nelson Peltz's Triarc Cos. agreed to buy Wendy's International Inc. for about $2.4 billion to combine the third-biggest US hamburger chain with his Arby's roast beef restaurants.
Wendy's jumped $1.07, or 4.2 percent, to $26.39 in New York Stock Exchange composite trading after Triarc said it will offer 4.25 shares for each Wendy's share. That values the chain's class A shares at about $26.78 each, 5.7 percent higher than Wednesday's closing price.
Peltz, 65, pressured Wendy's for more than two years to sell itself, and he became the chain's largest shareholder as it lagged behind McDonald's Corp. and Burger King Holdings Inc. Wendy's has been seeking a buyer since April 2007. Peltz said in July he might be willing to pay $37 to $41 s share for Wendy's.
Wendy's also reported first-quarter results yesterday.
Profit dropped 72 percent to $4.14 million, or 5 cents a share, missing analysts' estimates. Revenue fell 1.4 percent to $582.2 million, the fourth consecutive quarter of lower or little-changed sales.
The average estimate of nine analysts surveyed by Bloomberg was 17 cents.
Wendy's reported earlier this month that sales at company-owned and franchise outlets dropped for the second quarter in a row.
"We are not satisfied with first-quarter results," chief executive Kerrii Anderson said in a statement.
"Today's announcement is definitely a psychological disappointment, especially after the rather embarrassingly long one-year search," Cowen & Co. analyst Paul Westra wrote in a research note. "The drawn-out uncertainty ultimately led to a fundamental deterioration of the Wendy's business."
Triarc chief executive Roland Smith, 53, will be CEO of the combined company as well as of the Wendy's brand. The company will have sales of about $12.5 billion and 10,000 restaurants. Triarc, based in Atlanta, is less than one-third the size of Wendy's on the New York Stock Exchange.
Triarc class A stock rose 17 cents to $6.47.
The combination of the two chains may produce $100 million in additional operating earnings over time from reduced food, labor, and operating expenses. Wendy's may save $60 million by cutting duplicate corporate functions.
"Ultimately there's a lot to be realized in synergies and improvement of Wendy's, which certainly has been under-earning for a number of years," said Michael Gallo, an analyst at CL King & Associates who advises investors to buy Triarc shares. "Obviously it's going to take some time before all that settles in."
In February, Peltz threatened Wendy's with a proxy fight, saying he planned to nominate six candidates to the board. Last week he said Wendy's rejected an acquisition proposal and a separate offer to merge with Arby's. Peltz's Trian Fund Management is Wendy's largest shareholder with a 9.8 percent stake.
