After a year of exploring strategic options and many rounds of back-and-forth rancor with billionaire investor Nelson Peltz, the resolution of the $2.4 billion deal came during one frenzied final week when the threat of a rival suitor became real, sources familiar with the situation said.
The No. 3 hamburger chain began exploring strategic options last April and formally began searching for a buyer in June instead of pursuing other restructuring options. The talks with Peltz, who owned 9.8 percent of Wendy’s, seemed dead last week after the fast-food chain rejected two of his proposals as too low.
What a difference a week makes. Wendy’s had started earnest talks with a private equity firm after Peltz said he would call a special meeting of Wendy’s shareholders, sources said. When Peltz heard that the rival bidder was close to a deal, Peltz returned to the bargaining table, sources said. The Wall Street Journal said the rival suitor was Kelso & Co. Kelso could not be immediately reached for comment.
“When Wendy’s issues its proxy materials regarding its desperate agreement to merge with Triarc announced this morning, the ‘Background of the Merger’ section ought to be a doozy, especially considering last week’s volley of letters that disclosed that Wendy’s had turned Triarc down as recently as last week,” Carol Levenson, director of research at Gimme Credit, said in a report.
The deal valued Wendy’s at $26.78, based on Triarc’s closing stock price on Wednesday. Based on cash flow, the deal puts a price tag of about 8- to 8.5-times adjusted 2007 EBITDA on Wendy’s, which is a valuation level reminiscent of the buyout peak.
Under terms of the deal, Wendy’s shareholders would control 80 percent of the combined company, with Triarc shareholders owning the remaining 20 percent. The deal has no break-up fee.
Still, despite gaining majority control and finally quieting an activist shareholder, Wendy’s failed to fetch the $37 per share to $41 per share Peltz was prepared to offer in July. In November, Triarc’s offer fell below that level.
“The announced agreement implies a mere 6% premium to Wendy’s closing stock price, and promised merger synergies are vague as to content and the timing of realization,” Levenson said. “Apart from increasing its scale and some potential cost savings, this appears to be a credit-harming outcome for Wendy’s.”
Last year, sources told Reuters that two banks declined to fund Peltz’s bid for Wendy’s as the credit-crunch made deal-financing difficult to secure. In the end, financing was a moot issue. Triarc used all stock.
(Photo: Nelson Peltz, 2006, Reuters)
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In a merger deal that could have been launched by close board-room connections, Triarc Companies Inc, the franchisor of the Arby’s restaurant system, is buying out in an all-stock transaction Wendy’s International Inc, the two companies announced on Thursday in a joint statement. The new company will be the nation’s third-largest quick-service restaurant company, with approximately 10,000 restaurant units and sales of approximately $12.5 billion, the statement said. The new company expects to focus on breakfast, global expansion for both brands, and growth through future acquisitions and new unit development. “We believe the combination of Arby’s and Wendy’s will create a powerful new restaurant company and a ‘must own’ restaurant stock with significant upside potential as we execute on the many opportunities we see to expand and improve these two very valuable brands,” said Triarc CEO/Director Roland Smith. “Through the execution of major operating improvements and the realization of synergies, we expect to generate substantial value for shareholders. We also expect to execute on a number of growth initiatives for the combined organization that should further increase shareholder value,” he added. The deal could have come together as a result of high-level personal connections between the two companies.
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