The Zhitong Finance App learned that an investor consortium led by Trian Fund Management under activist investor Nelson Peltz proposed to buy the American fast food giant WEN.US (WEN.US) for about 1.4 billion US dollars and plan to privatize this struggling burger chain.
According to regulatory documents released on Wednesday, the consortium proposed to buy Wendy Burgers at a cash price of $7.35 per share, a premium of about 20% over Tuesday's closing price. In addition to Trian, investors involved in the acquisition include BlueFive Capital, Sixth Street Partners, and Flynn Group, one of Wendy Hamburg's largest franchisees.
Boosted by news of the takeover, Wendy Burger's stock price rose about 15% in early Wednesday trading to $7.05 as of press release.
The proposed acquisition comes at a time when Wendy Burger is under pressure to continue operating. Over the past two years, the company's stock price has fallen by a cumulative total of about 65%. Even when Wednesday's increase is included, the decline is still significant. Meanwhile, Wendy's Burger has recorded a decline in same-store sales for six consecutive quarters, reflecting continued pressure on its core business.
As consumers on tight budgets cut back on eating out, Wendy's Burger and its rivals are stepping up discount promotions to attract customers back to the restaurant. However, ongoing price competition has not effectively reversed Wendy Burger's decline in business.
Furthermore, frequent management changes have increased the company's operating uncertainty. In recent years, Wendy Burger has experienced many CEOs. There are differences in business recovery strategies proposed by different management teams, resulting in a lack of sustainability in the company's transformation direction.
In May of this year, Bob Wright, who was the CEO of Potbelly, became the new CEO of Wendy Burger. When attending the earnings conference call in this position for the first time in August, Wright admits that the main problems faced by the company include unclear cost performance positioning, inconsistent execution of store operations, and excessive reliance on scattered short-term promotions.
TD Cowen analyst Andrew Charles said in a report to clients on Wednesday that considering that low-income consumers continue to face economic pressure and that overall demand in the hamburger fast food industry is weak, Wendy Burger's business recovery may take a long time, so it is reasonable to privatize the company.
For Peltz, Wendy Burger's continued sluggish stock price also made it a more attractive acquisition target. In fact, Peltz's roots with Wendy Burger date back more than 20 years, when he launched an aggressive investor campaign against the company. In 2022, Trian also considered buying Wendy Hamburg, but then abandoned the plan.
According to the latest regulatory documents, Trian and its affiliates currently hold a total of 16.25% of Wendy Hamburg's shares, making them the company's largest shareholder. As of now, Wendy Burger has not publicly commented on the takeover proposal, while Trian declined to comment beyond what was disclosed in regulatory documents.
Wendy's Burger plans to announce third-quarter earnings before the US stock market opens on November 5. At that time, the company's latest operating performance and management's outlook for business recovery will be the focus of market attention.