Zacks_Analysts' Blog : Suitor Eying Wendy's/Arby's - Analyst Blog

Wendy's/Arby's Group Inc. (WEN) chairman Nelson Peltz who owns 23.5% of the company’s stock through his private equity firm Trian Fund Management, in a recent regulatory filing said that an unnamed third party has orally expressed interest in acquiring Wendy's/Arby's.

 

Wendy’s/Arby’s, based in Atlanta, was formed in 2008 when Peltz’s Triarc Companies Inc., the franchisor of the Arby's restaurant system acquired Wendy’s International, Inc, the owner-operator-franchisor of the eponymous fast food chain.

 

Peltz said that he is reviewing the proposal and plans to discuss the transaction with other shareholders and interested parties.

 

Wendy’s/Arby’s shares were positively impacted by this news and rose 7% to $4.65 last Friday. Wendy’s/Arby’s is the third largest quick service restaurant company in the country. We believe there are strategic growth opportunities at both Wendy’s and Arby’s brands, including international development under dual-brand restaurants.

 

In March 2010, Wendy's/Arby's was looking to acquire CKE Restaurants Inc. (CKR) the owner of the Hardee's and Carl's Jr. hamburger chains, but it was acquired by a private equity firm Apollo Management VII LP for $694 million in April 2010. However, in February 2010, CKR had accepted a lower bid from another private equity firm, Thomas H. Lee Partners.

 

Wendy’s/Arby’s recently posted first-quarter 2010 results that topped the Zacks expectation by a penny on the back of the Wendy's brand, but continues to be hurt by sluggish sales at its Arby's restaurants making the recovery difficult for the restaurant chain.

 

Wendy’s/Arby’s has undertaken a massive remodeling program, and is also investing to improve Wendy’s breakfast line-up and expand Arby’s Value Menu offerings to drive traffic and improve sales. The company expanded the $1 Value Menu to more than 3,700 Arby’s restaurants.

 

We currently have a short-term Hold recommendation on the stock.