Wendy’s board on Thursday unanimously rejected a $7.35-per-share cash offer to take the burger chain private. That’s a $1.4 billion bid from Nelson Peltz’s Trian Partners. The Wendy’s takeover bid rejection leaves shareholders holding stock that trades above the offer, with a poison pill now standing guard.
If you own Wendy’s shares, or a fund that does, here’s the upshot. Wendy’s stock traded at $7.75 before the open Thursday, above the offer. So investors are saying the bid is too low, and some may be betting on a sweeter one. If you just want a Baconator, nothing changes today. We found no reporting on effects to menu prices, restaurant operations or jobs, so ignore anyone telling you otherwise.
Peltz rolled up to the Wendy’s counter with $1.4 billion and left without the keys. The offer came from an investor group led by Trian, CBS News reports. The group also includes Flynn Group, BlueFive Capital and Sixth Street Partners. Flynn is one of Wendy’s largest franchisees, so some of the people who run the restaurants are part of the group trying to buy the company. The board said the offer undervalues Wendy’s and is not in shareholders’ best interest. For the full backstory on the pitch, see our earlier report on Peltz’s return to Wendy’s with a franchisee at his side.
Why Wendy’s rejects takeover offer: what the board said
An independent committee of directors with no ties to the investor group reviewed the proposal. The board formed it after Trian’s February filing. Its verdict was blunt.
“The Independent Committee thoroughly evaluated this Proposal and unanimously concluded that it substantially undervalues Wendy’s standalone prospects and long-term earnings potential,” board chairman Art Winkleblack said, per CBS. Winkleblack also voiced confidence in CEO Bob Wright.
The committee added that the bid ignores the gains from Wendy’s turnaround strategy, CNBC reports. Wendy’s had said it received the unsolicited, non-binding proposal on Oct. 28. It covers every share the group doesn’t already own.
Wendy’s poison pill
The board did not stop at “no.” It adopted a one-year shareholder rights plan, a poison pill, effective Wednesday, according to CNBC. The plan makes it harder for any one party to quietly pile up a bigger stake. We could not find the ownership trigger, so treat the details as unknown for now.
That matters because Trian already owns about 16.3% of Wendy’s. That figure includes holdings through related parties, according to Reuters as relayed by Yahoo Finance. So the pill is aimed squarely at the person in the room, and it is the sharpest edge of this Wendy’s takeover bid rejection.
Wendy’s buyout offer rejected: here’s the thing about the price
Here’s the thing: the market does not love $7.35 either, but the stock’s record is shaky. Wendy’s shares are down nearly 14% over the past year, CBS notes. Over three years, they are down about 60%, per CNBC.
The company is still profitable, but revenue growth has slowed. In August, Wright told analysts the chain had “drifted away” from some of its distinctive standards. He said it needs better food quality. A board telling investors to wait for the turnaround has a lot to prove.
Wendy’s is not the only target of a lowball-price fight. Elsewhere, a Ray-Ban heir turned down his stepbrother’s $3.9 billion offer.
A very old rivalry behind the Wendy’s takeover bid rejection
This is not a first date. In 2008, Peltz’s company Triarc, which also owned Arby’s, bought Wendy’s in a $2.3 billion deal. Now he is back at the counter, and this time the board is not handing over the keys.
Trian could raise the offer, take its case to shareholders, or walk away. Trian declined to comment. Watch for new SEC filings from both sides.
Whether Peltz gets to buy Wendy’s again is now up to a board that just said “not at this price.”
