Wendy’s (NASDAQ: WEN), the US burger chain, said its independent directors unanimously rejected a $7.35-a-share cash takeover proposal from a group led by activist investor Trian Partners. The company announced the decision just after midday London time today. The offer valued Wendy’s at about $1.4bn.
The shares are trading at $7.735 in a delayed quote from 3.47pm, up 1.1% on yesterday’s $7.65 close and 5.2% above the rejected offer. Results were published at the same time as the rejection, so today’s move cannot be put down to the rejection alone. The stock jumped 15.1% on the 28th of October, from $6.14 to $7.07, when the bid emerged.
The unsolicited, non-binding proposal came from Trian, Flynn Group, one of Wendy’s largest franchisees, and investment firms BlueFive Capital and Sixth Street Partners. It carried a premium of about 20%. The committee of directors unaffiliated with Trian said the offer fell short of what it expects from the company’s turnaround plan.
Art Winkleblack, Wendy’s chairman and an Independent Committee member, said:
The Independent Committee thoroughly evaluated this Proposal and unanimously concluded that it substantially undervalues Wendy’s standalone prospects and long-term earnings potential,
Art Winkleblack, Wendy’s
The board also adopted a one-year poison pill yesterday. This rights plan dilutes the holdings of anyone who builds a stake of 15% or more without board approval, and it expires on the 3rd of November next year. Wendy’s said the investor group rejected its offer of a standstill, a promise not to buy more shares. Trian held roughly 16% at the end of June.
The plan the board is backing is Dave’s Way, a multi-year turnaround under chief executive Bob Wright, launched with third-quarter results. Those results showed adjusted earnings per share of $0.13 against $0.24 a year earlier, and sales at restaurants open over a year fell 5.2%. Chief financial officer Steve Cirulis said Wendy’s has the financial capacity to execute the strategy.
The stock sits well above its October low of $5.94 but below the $9.12 close it reached in late August. The turnaround is not yet visible in the numbers.
Wendy’s said it does not intend to comment further unless it decides additional disclosure is appropriate or required.