Wendy’s board rejects $1.4 billion Trian-led takeover offer

Wendy’s said on November 5 that its board unanimously rejected a $1.4 billion takeover proposal from an investor group led by Trian Fund Management. The group offered $7.35 a share in cash on October 28. Wendy’s said the bid substantially undervalued its standalone prospects and did not reflect potential gains from its turnaround strategy.

Who made the offer and how Wendy’s reviewed it

The offer group included Trian, BlueFive Capital, Sixth Street Partners and Flynn Group, which CNBC described as one of Wendy’s largest franchisees. Wendy’s board formed a committee of independent directors in February to assess a potential Trian bid. The committee unanimously concluded that the proposal substantially undervalued the company’s long-term earnings potential, according to statements reported by CNBC and CBS News. That is the board’s assessment of Wendy’s prospects.

Wendy’s said it adopted a shareholder rights plan lasting one year, effective November 4. The company also said the investor group rejected its proposed standstill agreement, which would have paused additional share purchases.

Wendy’s sales have fallen for seven straight quarters

The takeover decision comes as Wendy’s tries to revive its business. U.S. same-restaurant sales fell 5.7% year over year in the third quarter, CBS News reported; CNBC said same-store sales had declined for a seventh consecutive quarter. Wendy’s reported quarterly revenue of $547 million, down from $549.5 million a year earlier, while CNBC said earnings and revenue exceeded Wall Street expectations.

During an August call with Wall Street analysts, Wright said Wendy’s needed to address staffing, employee training, drive-through orders and marketing, and improve food quality, CBS News reported. He said the company had drifted from standards that once differentiated its food, including fresh, never-frozen beef and produce prepared daily. Wendy’s has framed its turnaround prospects as a reason the cash offer undervalues the chain.