The Wendy’s takeover rejection came on 5 November, when the fast-food chain turned down an unsolicited offer of 7.35 dollars per share in cash from an investor group led by Trian Fund Management. The proposal, worth about 1.4 billion dollars, would have taken Wendy’s private. An independent committee of the board unanimously rejected it, saying it substantially undervalues the company.
The investor group includes Trian Partners, Flynn Group LP, BlueFive Capital and Sixth Street Partners. The group offered to buy all of the outstanding Wendy’s shares it does not already own, at 7.35 dollars each in cash. Trian and related parties own a 16.3 per cent stake in Wendy’s, according to a regulatory filing, and Trian is the fund run by activist investor Nelson Peltz.
The committee said the proposal “substantially undervalues the company, does not reflect the value the independent committee expects to be created through the system’s execution of Dave’s Way and is not in the best interests of Wendy’s and its shareholders.” The Wendy’s takeover rejection was announced alongside the company’s third-quarter results, and Food Business News reported it on 9 November.
Wendy’s takeover rejection and Dave’s Way
Dave’s Way is the multi-year turnaround plan Wendy’s unveiled with its third-quarter earnings. The plan was drawn up under new chief executive Bob Wright, and it aims to improve menu value and marketing. The committee said the value created by carrying out the plan would be greater than the 7.35 dollars per share on offer, and that shareholders would be better off if the company stayed independent.
The offer came about three months after Wendy’s withdrew its annual forecast, cut its dividend and launched the turnaround plan. The chain has been under pressure from rising costs and falling market share, and the new chief executive has been given the job of reviving it. The Wendy’s takeover rejection is a bet that the plan will work, and that the shares are worth more than the bid.
Morgan Stanley and Goldman Sachs acted as financial advisers to the independent committee, which reviewed the proposal with independent legal advisers. The committee is made up of directors who are not affiliated with Trian, and it said it had carefully and thoroughly reviewed the offer before turning it down.
Wendy’s takeover rejection and the poison pill
Wendy’s also adopted a limited-duration shareholder rights plan on 4 November, a defence commonly known as a poison pill. The plan is designed to stop any investor from building up more than a 15 per cent stake without board approval, and it will make a hostile takeover more expensive. The rights plan is effective immediately and expires on 3 November 2027.
The Wendy’s takeover rejection was reported by Reuters on 5 November, and the company’s shares were up about 1 per cent at 7.75 dollars in trading that day, according to SRN News. The offer was a premium of about 20 per cent to Wendy’s share price of 6.14 dollars at the close on 27 October, the day before the offer was made. The market moved past the bid quickly, and the shares closed at 7.94 dollars that day before rising further the next day.
The offer came about three months after Wendy’s withdrew its annual forecast, cut its dividend and launched a turnaround plan under new chief executive Bob Wright, according to Reuters. The Wendy’s takeover rejection came as the chain faces rising operating expenses, declining market share and pressure to modernise its restaurant network, according to the Associated Press.
The Wendy’s takeover rejection leaves the board with a plan to defend and a share price to justify. The shares closed at 8.15 dollars on 6 November, above the 7.35 dollar offer, which raises questions about whether investors anticipate a revised proposal or greater value from the turnaround, according to Business News Today.
Wendy’s third-quarter results, released the same day, showed why the board is under pressure. Net income for the quarter ended 27 September was 15.1 million dollars, or 8 cents per share, down 66 per cent from 44.3 million dollars, or 23 cents per share, a year earlier. Revenue was 547 million dollars, against 549.5 million dollars a year ago, and United States same-restaurant sales fell 5.7 per cent. The Wendy’s takeover rejection leaves the chain to prove that Dave’s Way can turn those numbers around.