Wendy’s International, the third largest US hamburger restaurant chain, on Wednesday said it was considering a sale in the wake of protracted pressure from several large shareholders.
The company reported that its flagship hamburger business had returned
to profitability in the first quarter.
It said it had formed a special committee of board members led by James Pickett, chairman, to review its options. These included revisions of the company’s strategy, changes to the capital structure, a sale or a merger, Wendy’s said.
A sale of Wendy’s could be worth as much as $4bn, provided the company is able to extract a significant premium to its current market value of $3.1bn.
Wendy’s shares were up 1.8 per cent to $32.68 in the New York Stock Exchange but soared 15 per cent in after-hours trading after the announcement.
In recent years, Bill Ackman and Nelson Peltz, two of the most prominent US activist investors, have taken stakes in Wendy’s and put pressure on the company to make certain changes, including the separation from non-core assets such as Tim Hortons, the Canadian coffee and doughnut chain, and Baja Fresh, the Mexican grill chain.
The company’s decision to consider a sale could signal doubts within the board about its ability to complete an ambitious turnround plan for its core business.
The most likely buyers for Wendy’s, which brands over 6,600 restaurants worldwide, are private equity groups, which have targeted restaurant groups because of their generally predictable cashflows.
Buy-out firms acquired Burger King, the second-largest US hamburger chain, several years before taking it public again.
In the first quarter, Wendy’s reported a 2 per cent jump in revenues to $590m. Same-store sales for US company-operated restaurants were up 3.8 per cent. Pre-tax income from continuing operations was $21.8m, compared with a loss of $7.6m in the first quarter of 2006.