Pressured, Wendy's considers sale

NEW YORK -- Wendy's International Inc., the third-largest US hamburger chain, said it may sell itself after coming under pressure from investors including Nelson Peltz.

Wendy's board formed a committee to consider options, including a sale, merger, or change in strategy, the company said yesterday in a statement.

Peltz and former shareholder William Ackman have urged the chain, based in Dublin, Ohio, to boost its stock price. They persuaded Wendy's to spin off Tim Hortons, a coffee and doughnut chain, in September and sell the Baja Fresh chain in November. Wendy's has half as many US locations as McDonald's Corp.

The shares jumped $4.88, or 15 percent, to $37.56 in after-hours trading. They had fallen 1.2 percent this year before yesterday's announcement.

Wendy's also reported a first-quarter profit on sales of extra-spicy chicken sandwiches and other new items. Income from continuing operations was $14.5 million, or 15 cents a share, compared with a loss of $5.9 million, or 5 cents, a year earlier. Sales rose 2 percent to $590.2 million.

Wendy's bowed to pressure from Peltz in March 2006, adding three board members chosen by him and agreeing to spin off Tim Hortons. Peltz initially bought a 5.5 percent stake in Wendy's and urged the company to cut costs and sell assets.

Peltz agreed to abandon a proxy fight, though the stand-still agreement with Peltz is set to expire June 30. His Trian funds held about 9.7 million shares as of December, making it the company's largest investor.

Rachael Rothman, an analyst at Merrill Lynch & Co., wrote in a note that Wendy's share price may be too high to attract buyers. "The valuation makes Wendy's a less attractive LBO candidate than some of the other quick-service restaurant chains," she wrote.

Dave Thomas opened the first Wendy's in 1969, naming the restaurant after his daughter, Melinda Lou, who was nicknamed "Wendy." The company went public in 1976, raising $28 million, and by 1997 had opened its 5,000th restaurant. Thomas died in 2002 of liver cancer.

Tim Hortons, a Canadian chain, contributed more than half of Wendy's operating profit in 2005.

Under chief executive Kerrii Anderson, Wendy's has introduced cold deli sandwiches, a 99-cent chicken sandwich, and a vanilla Frosty shake. The products helped boost first-quarter same-store US sales by 3.8 percent.

Wendy's same-store sales had dropped for six consecutive quarters before former chief executive Jack Schuessler resigned. Since Anderson took over last April, the company's sales have increased for four consecutive quarters.