The recent decision by Wendy’s International Inc.’s board to consider selling the company clearly indicates that investors are growing impatient with the company’s turnaround plans. The Dublin based company has recently revealed that its board formed a special committee of independent directors to examine all strategic options for Wendy’s. The firm further said that the committee is considering a possible sale, merger or other ‘business combination,’ and mulling over changing Wendy’s tactical plan and capital structure. Chairman James V. Pickett of the third-largest US hamburger chain will head the committee.
The announcement of a possible sale follows campaign for change led by billionaire investor Nelson Peltz, who had last year managed to capture three seats on an expanded Wendy’s board as he pushed for steps to reward shareholders. They had earlier persuaded Wendy’s to sell off Tim Hortons, a coffee and doughnut chain, in September and spin off its Baja Fresh chain in November.
Wendy’s has half as many US locations as McDonald’s Corp. Peltz had agreed to dump a proxy fight, though his stand- still agreement with the company is due to expire in June this year. His Trian funds held about 9.7 million shares as of December, making it the company’s largest investor.
In the mean time, Wendy’s has announced its first-quarter earnings that were held consistent with Wall Street projections. Net income totaled $14.7 million, or 15 cents a share, compared with $51.2 million, or 45 cents a share, last year, when the company was much larger. However, the stock soared 13 percent to a record after the announcement of a possible sale.
The company’s decision to consider a sale could signal uncertainties within the board about its ability to accomplish an ambitious turnaround plan for its central business. However, the most probable buyers for Wendy’s, which brands over 6,600 restaurants worldwide, are obviously private equity groups, which have targeted restaurant groups because of their normally predictable cash flows.
