Updated Version 5 - Correction - Wendy’s receives $1.4 billion privatization offer from consortium led by Peltz

Added details about Wendy's restaurant in paragraph 4, updated stock price

Anuja Bharat Mistry/Svea Herbst-Bayliss

Reuters, October 28 - Billionaire Nelson Peltz and several of his partners on Wednesday proposed a $1.4 billion acquisition of hamburger chain Wendy's (WEN.O), believing the struggling fast-food chain needs a business overhaul that would be more effective out of the public eye.

According to regulatory filings, Peltz's Trian Fund Management (a longtime Wendy's shareholder, holding a combined 16.3% stake in the company along with affiliates) is leading a consortium that is proposing to buy the fast-food chain for $7.35 in cash per share.

The offer represents a roughly 20% premium over Wendy's Tuesday closing price, pushing the company's share price up as much as 17.3% to $7.20.

Wendy's confirmed receipt of the offer and stated in a release that its independent committee will review the proposal, noting there is no guarantee the company will pursue this transaction or any other strategic options.

This acquisition would deepen the nearly two-decade partnership between Wendy’s and Trian, which has maintained a significant position on Wendy’s board.

The investor group wrote in a letter to the company’s board: “We believe privatization is a better alternative, providing the patience and long-term capital needed to restore the business and the strength of the franchise system.”

According to the filings, Peltz is working on the deal with restaurant operator Flynn Group, and investment firms BlueFive Capital and Sixth Street Partners.

Flynn Group operates more than 340 Wendy's restaurants, making it one of the largest franchisees of the chain in the U.S., and is the master franchisee in Australia and New Zealand.

"Critical Moment"

Trian said Wendy’s is at a “critical moment”, citing pressures on U.S. consumers, economic uncertainty, ongoing commodity inflation, and intensifying competition in the fast-food burger market.

As cost-conscious consumers eat out less, Wendy’s has struggled with declining sales. The company withdrew its annual outlook in August, with CEO Bob Wright then (link) saying: “Our performance fell short of expectations.”

“The company requires significant capital infusion to reduce leverage and to implement strategic initiatives needed to turn around system performance,” Peltz and Flynn Group CEO Greg Flynn said in a letter to Wendy’s. As of June 28, Wendy’s net debt stood at around $2.4 billion.

Trian Fund declined to comment beyond what is stated in the filings.

“Given the distress faced by lower-income consumers and the general softness in the fast-food burger category, Wendy’s turnaround could take time, so privatization is reasonable,” analysts at TD Cowen said.

Earlier this year, Reuters and other outlets reported Trian and a group of investors were preparing to make an offer to take Wendy’s private.

Reuters later reported that Trian had no immediate plans to make a privatization bid (link), and had concerns over Wendy’s performance—including its share price, valuation multiples, and strategic direction.

The buyout bid was first reported Wednesday by The Wall Street Journal.

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Years of Ambition

Wendy’s relationship with Trian Fund has lasted nearly 20 years, with its co-founder Peter May serving on Wendy’s board for as many as 18 years. Last year, Nelson Peltz’s son Bradley Peltz joined the nine-member board. Previously, Nelson Peltz and another son, Matthew, also served as board members.

Trian considered taking Wendy’s private in 2022 but abandoned the plans in 2023.

In February this year, Peltz said the stock was undervalued and that his investment company had engaged with potential financiers on possible transactions, including an acquisition or other major deals.

So far this year, Wendy’s stock price has fallen about 26%.

(To facilitate non-native English speakers, Reuters has automated the translation of this report into several other languages. As automated translation may contain errors or miss required context, Reuters does not guarantee the accuracy of the translated text, and it is provided solely for reader convenience. Reuters accepts no liability for any harm or loss resulting from the use of the automated translation feature.)