Wendy's Rejects Trian-Led US$1.4 Billion Buyout Bid

Wendy’s has turned down a US$1.4 billion offer to take the burger chain private from an investor group led by Nelson Peltz’s Trian Partners, saying the bid undervalues the company, CBS News reported on Thursday. The board also adopted a one-year shareholder rights plan, commonly known as a poison pill.

According to a company statement issued on November 5, an Independent Committee of directors unaffiliated with Trian reviewed the unsolicited, non-binding proposal with independent financial and legal advisers and rejected it unanimously. The group had offered US$7.35 per share in cash for all shares it does not already own.

Besides Trian, the investor group includes Flynn Group LP, BlueFive Capital and Sixth Street Partners. Board chairman Art Winkleblack said in the statement that the offer “substantially undervalues Wendy’s standalone prospects and long-term earnings potential.”

CBS News said Wendy’s shares were trading at US$7.75 before the market opened on Thursday, above the offer price, and that the stock had fallen nearly 14% over the past 12 months. Wendy’s had confirmed receiving the offer last month.

Poison pill adopted

The rights plan, approved by the board on November 4, takes effect immediately and expires on November 3, 2027, the company said. The rights become exercisable if a person or group acquires 15% or more of the common stock without approval from the board or the Independent Committee.

Shareholders on record at the close of business on November 16 will receive one right per share. The company said the plan does not prevent the board from considering any offer it views as fair, and that the investor group had rejected its offer to sign a customary standstill agreement. Further details are to be filed in a Form 8-K.

Turnaround plan

Alongside its third-quarter earnings release, Wendy’s set out a strategy it calls “Dave’s Way”, built on five pillars: menu and food quality, branding and marketing, operational excellence, the digital experience and restaurant growth, according to QSR Web. The company said it has strengthened its leadership team, aligned its franchise system and set up a Strategic Activation Office.

CBS News noted that the chain, which has more than 7,000 locations worldwide, has seen revenue growth slow in recent years while remaining profitable. Chief executive Bob Wright said on an August earnings call that the company needed to improve food quality and fix operational issues including staffing, training and drive-thru orders.

What’s next

The Independent Committee will keep taking actions it considers to be in the best interests of the company and its shareholders, Wendy’s said, adding that it does not plan to comment further unless required. QSR Web reported that Wright repeated that position on the company’s third-quarter earnings call.

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