Peltz's Trian Offers $7.35 a Share to Take Wendy's Private in $1.4 Billion Bid

Nelson Peltz wants Wendy's off the public market. His Trian Fund Management led a group that offered $7.35 per share in cash today, Oct. 28, for a deal valuing the burger chain at about $1.4 billion, according to a regulatory filing.

That price is a roughly 20% premium to Tuesday's closing share price. Wendy's shares jumped about 15% in morning trading Wednesday. Before the open they were up about 16% at $7.12.

Who is in the group

Trian is Wendy's largest shareholder. It and related parties hold about 16.25% of the company, per the filing. The bid covers all shares the group does not already own.

Three partners are in with Trian: BlueFive Capital, Sixth Street Partners and Flynn Group. Flynn operates more than 340 Wendy's restaurants and is one of the chain's largest U.S. franchisees. It is also the master franchisee in Australia and New Zealand.

The group said the deal would not require new debt and would not be conditional on financing. The proposal is nonbinding. It still needs approval from Wendy's board, and Trian said it expects a special committee of independent directors to evaluate it.

Wendy's has not commented. Trian declined to say more than what is in the filing. The Wall Street Journal first reported the offer.

Peltz's case for going private

In a letter to the board, Peltz wrote that "Wendy's sits at a critical juncture." He cited pressure on U.S. consumers, economic uncertainty, commodity inflation and tougher competition in burgers.

He also said the business "requires significant capital investment to de-lever and execute the strategic initiatives needed to turn system performance around."

His argument is that a turnaround goes better away from quarterly scrutiny. "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.

TD Cowen analyst Andrew Charles backed that logic in a note to clients. "A take private makes sense as Wendy's turnaround is likely to be prolonged given the challenged state of the lower income consumer and soft state of the quick service burger category," he wrote.

The numbers behind the offer

Wendy's stock is down 65% over the past two years, even after today's jump. The company has reported same-store sales declines for six straight quarters.

In the second quarter, global systemwide sales fell 6.5% to about $3.4 billion. U.S. same-restaurant sales dropped 7%. Revenue edged up 1.7% to $570.6 million, but operating profit fell 24% to $79.3 million and net income fell more than 40% to $32.6 million.

The U.S. footprint is shrinking. 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 outlook while new leadership works on a multiyear turnaround plan. It also cut its annualized dividend to 28 cents a share. Bob Wright, the former Potbelly CEO, took over as chief executive in May. On his first earnings call in August, he named muddled value offerings, inconsistent restaurant execution and too many one-off promotions as the chain's biggest problems.

Wright is the latest in a string of CEOs who have each brought a different turnaround idea.

Peltz's history with the chain

Peltz's tie to Wendy's goes back more than two decades, to an activist campaign he led. Trian explored a takeover in 2022 and walked away.

Earlier this year, Reuters and others reported that Trian and a group of investors were preparing a bid. Reuters later reported that Trian had no immediate plans to make an offer and had concerns about Wendy's share price, valuation multiples and strategic direction. In February, Peltz said the stock was undervalued and that Trian had talked with potential financing sources about deals, including an acquisition.

That history is the basis for the skepticism from Yahoo Finance's Brian Sozzi. "Peltz would be buying a dumpster fire he helped create," Sozzi said, pointing to the six quarters of falling same-store sales. Peltz is a longtime shareholder, and Sozzi's point is that he shares responsibility for the conditions he now proposes to pay to fix.

Peltz's side is that the premium gives public shareholders a cash exit at a price above Tuesday's close, and that Trian, with a 16% stake, has its own money tied to the outcome. Neither side's claim has been tested yet. The special committee's review will be the first independent look at the price.

What comes next

The $7.35 offer works as a reference price for the stock, which was valued at about $1.2 billion in market capitalization on Tuesday. Because the proposal is nonbinding, the board's response is the next catalyst. Any rival bidder would have to top it.

Wendy's is scheduled to report third-quarter results before the bell on Nov. 5. That report will show whether the same-store sales slide has extended to a seventh quarter. The company has not said whether it will respond to the offer before then.