Nelson Peltz's Trian Fund Considers Buying Wendy's (WEN), Analyst Says Deal is Feasible

May 25, 2022 6:44 AM EDT
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Wendy’s (NASDAQ: WEN) largest shareholder is reportedly exploring options for a takeover or another potential deal for the fast-food chain.

Trian Fund Management, an asset management firm that holds the largest stake in Wendy’s, told the restaurant’s board that it plans to explore potential deal options in an effort to increase shareholder value. The potential deal could be a full sale of Wendy’s, a merger, or another type of transaction that would affect the fast-food restaurant’s management.

Trian Fund Management, which holds a roughly 19.4% stake in the company, is led by founders Peter May, Ed Garden, and Nelson Peltz, who is also a chairman of Wendy’s board of directors.

Wendy’s has been pushing to lure more consumers by opening new locations and adding fresh offerings to its menu such as the new chicken sandwich lineup. The company has also started a new breakfast business following the coronavirus outbreak in which it has invested millions of dollars.

The chain, which continues to grapple with rising costs just like its rivals, has noted a traffic slowdown in the first fiscal quarter of the year, in part due to low-income consumers. Wendy’s reported poorer sales among households that earn less than $75,000 and has hiked prices in the first quarter. The chain plans another price hike in the current quarter as well.

Stifel analyst Chris O'Cull thinks the Peltz could indeed acquire Wendy’s as the company has failed to convince investors it “offers a compelling secular growth thesis.”

“The company has executed its breakfast, digital, and international initiatives well. Still, these initiatives either lack or are too early to create a virtuous growth cycle that investors find in companies increasing scale through meaningful unit expansion. Many of Wendy's competitors are larger platforms spreading rising costs across a growing restaurant portfolio to improve unit economics and achieve higher growth rates, consequently earning a premium valuation. Thus far, Wendy's has struggled to convince investors it is on that path,” O’Cull said in a note.

KeyBanc analyst Eric Gonzalez added:

“Our guess is that Trian Partners has recognized that Wendy’s three core initiatives: 1) growing the breakfast daypart; 2) accelerating digital adoption; and 3) seeding new unit development, are not being appropriately valued by the public markets. Thus, a go-private transaction where Wendy can reinvest capital as necessary to accelerate growth might be in the best interest of its investors.”

Shares of Wendy’s are up almost 12% in premarket trading Wednesday.

By Senad Karaahmetovic

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