Wendys Rejects $1.4 Billion Buyout Offer From Nelson Peltz-Led Group

Wendy’s has rejected a $1.4 billion takeover offer from billionaire investor Nelson Peltz, saying the proposal “substantially undervalues” the burger chain and its turnaround prospects.A committee of independent Wendy’s directors unanimously rejected the unsolicited offer after reviewing it with financial and legal advisers, the company said on Thursday.The decision came eight days after Trian Fund Management, Peltz’s activist hedge fund, made its proposal public.Trian, which owns about 16.3 percent of Wendy’s outstanding shares, was joined by restaurant operator Flynn Group and investment firms BlueFive Capital and Sixth Street Partners. They had offered $7.35 in cash for each Wendy’s share they did not already own.The offer represented a 20 percent premium to Wendy’s closing share price on Oct. 27, the day before the proposal was announced.Wendy’s said its independent committee concluded that the offer failed to reflect the value it expects to generate under a new multiyear turnaround strategy dubbed “Dave’s Way,” named after founder Dave Thomas, that includes improved food and marketing.The committee “unanimously concluded that it substantially undervalues Wendy’s standalone prospects and long-term earnings potential,” board Chairman Art Winkleblack said in a statement.Winkleblack said the board remained confident in CEO Bob Wright, citing his experience leading restaurant turnarounds.Wendy’s Adopts Takeover DefenseAlongside the rejection, Wendy’s adopted a one-year shareholder rights plan designed to make it more difficult for an investor to increase its stake without board approval.Under the plan, commonly called a “poison pill” defense, the rights will become exercisable if an investor reaches 15 percent ownership or if an existing holder already above that threshold acquires additional shares without approval.If triggered, other shareholders would be able to acquire additional Wendy’s shares on favorable terms, potentially diluting the stake of the acquiring investor.The plan expires on Nov. 3, 2027, although Wendy’s said it could terminate it earlier.The company said the measure is not intended to prevent the board from considering a takeover offer it believes is fair to shareholders.Wendy’s also said the Trian-led investor group had rejected its request to enter into a customary standstill agreement.Q3 Performance ReportThe takeover dispute comes as Wendy’s struggles with declining sales and profits in the United States.The company separately reported on Thursday that in the third quarter, its U.S. same-restaurant sales fell 5.7 percent. International same-restaurant sales decreased 2.2 percent.Quarterly revenue slipped 0.5 percent to $547 million, while net income fell nearly 66 percent to $15.1 million from $44.3 million a year earlier.Wendy’s attributes the declines primarily to fewer customer visits, labor-cost inflation, and commodity inflation.Trian had pointed to those same challenges in making its offer.In its Oct. 28 letter to the board, Peltz said Wendy’s was at a “critical juncture,” facing pressure on consumers, economic uncertainty, commodity inflation, growing competition with other burger chains, and the significant investment needed to reduce debt.“We believe private ownership is the better path and provides the patient, long-duration capital needed to restore the business and the franchise system to a position of strength,” he wrote.Wendy’s, however, said it believes the turnaround can be carried out while remaining public.“We have evaluated the investment needs of Dave’s Way and are confident we have the financial capacity to execute the strategy,” Steve Cirulis, CFO of Wendy’s, said in a statement.