Wendy’s Finally Eaten Up

Nelson Peltz, Chairman of Triarc (TRY), the franchisor of Arby’s restaurant chain, was able to strike a buyout deal with Wendy’’s (WEN). Under the merger agreement, expected to close in the second half of the year, WEN shareholders will receive 4.25 shares of Triarc for each share of Wendy’’s they own. This equates to $25.29 per share at Triarc A shares’ current price ($5.95).

Wendy’’s incoming management team, led by Arby’s CEO, have outlined what we think is a viable, albeit multi-year turnaround plan that includes improving margins, reinvigorating the brand, revitalizing comps, and expanding internationally. However, Wendy’’s turnaround efforts come at a difficult time for the industry, which faces rising input costs and consumer spending pressures.

While we think there is a lot of low-hanging fruit for initial margin improvement, the management’s 500 basis point target will in our opinion take at least two years and necessitate executing on many levels.

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