Wendy’s draws buyout bid as beef costs and burger rivalry weigh on business

ETMarkets.com

Wendy’s draws buyout bid as beef costs and burger rivalry weigh on business.

The group has offered $7.35 a share in cash, a premium of nearly 19% to Wendy’s Tuesday closing price. Trian’s stake in the company stands at 16.3%, according to a regulatory filing cited by AP.

The bid comes as Wendy’s faces a difficult operating environment, with high beef and other commodity costs, pressure on lower income consumers and intensifying competition in the US burger market.

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Wendy’s tries to regain ground

Wendy’s has been losing ground to rivals as the fast food market becomes more crowded. Its share of US burger chain sales fell to 10.4% last year from 11.5% in 2019, according to Technomic, a market research company.

The company has also been closing older restaurants to focus on more profitable locations. It shut 240 US restaurants in 2024 and planned to close as many as 358 locations this year.

The challenges have extended to its franchise network. Last month, Michigan based Meritage Hospitality Group, one of Wendy’s largest US franchisees, filed for bankruptcy protection after Wendy’s sought to terminate its franchise agreement. Meritage operates 314 Wendy’s restaurants across 15 states.

In a letter to Wendy’s board, Peltz said going private “will deliver the best outcome for the broader stakeholder base.”

“Wendy’s sits at a critical juncture," Peltz wrote. "The external environment has become increasingly challenging given the significant pressures on the U.S. consumer, economic uncertainty, persistent commodity inflation and intensifying competition, particularly within the QSR (quick service restaurant) burger category."

Take private bid tests turnaround prospects

Peltz had considered taking Wendy’s private in 2022 but abandoned the idea in January 2023, citing improved business momentum, according to TD Cowen analyst Andrew Charles, as reported by AP.

Charles said a special committee is expected to assess the proposal and the two sides have entered into a confidentiality arrangement.

“In our view, a take private makes sense as Wendy’s turnaround is likely to be prolonged given the challenged state of the lower income consumer and soft state of the quick service burger category,” Charles wrote in a note to investors.

Wendy’s is due to report quarterly results next week. Analysts expect earnings of 9 cents a share on sales of $531 million, according to FactSet. The stock has fallen 26% this year and closed Wednesday at $7.01, up 88 cents.