A group led by Nelson Peltz's Trian, with franchisee Flynn Group, BlueFive Capital and Sixth Street, proposed $7.35 a share in cash and said no new debt would be needed. The shares rose about 14% to about $7.02.
The headline premium on the proposal for Wendy's depends on which day you start counting.
A group led by Trian Fund Management and Flynn Group, together with BlueFive Capital and Sixth Street, submitted a non-binding proposal on Wednesday to buy all Wendy's shares it does not already own for $7.35 a share in cash, Trian disclosed in an amended Schedule 13D filing. The group owns about 16.25% of the company and would roll those shares into the new owner. On about 194 million fully diluted shares, the price values Wendy's equity at about $1.43 billion.
Three ways to measure the price
Against Tuesday's close of $6.14, $7.35 is a premium of about 20%, the figure the bidders cite. Against Aug. 11, the last session before reports that Trian was preparing a bid, when the stock closed at $7.55, it is about 2.6% lower. Against Aug. 12, when the stock jumped to $8.66 on those reports, it is about 15% lower, by our arithmetic. The shares fell about 29% between that Aug. 12 close and Tuesday.
Wendy's traded at about $7.02 in early afternoon, up about 14% on about 26 million shares, five times Tuesday's full-day volume and about 4.6% below the proposal. Shares began rising shortly after 8 a.m. Eastern, before Trian's filing was posted at about 8:35 a.m. The Wall Street Journal first reported the proposal that morning. Listed burger peers moved far less, with McDonald's and Yum Brands each up about 0.6%.
What the bidders are proposing
The financing is unusual for a take-private. Equity would come from the proposal parties, BlueFive, Sixth Street "and other investors," plus the rolled-over stake. The deal "would not be subject to a financing condition or require any new debt," the filing says, and "the Company's existing securitization financing would remain in place following closing." Equity commitment letters would be signed with a definitive agreement, and the equity financing "remains subject to negotiation."
Trian's case is that public markets are the wrong home for the turnaround. It cites "approaching debt maturities and the significant capital investment needed for the brand, all under the short-term pressure of public markets," and argues private ownership would provide "patient, long-duration capital."
The governance map
The bidder is an insider. Trian's Peter May sits on Wendy's board as a director, Flynn Group is one of Wendy's largest franchisees, and a cooperation letter bars Flynn from buying Wendy's shares on its own while it is in effect. The proposal anticipates review by a special committee of independent directors. Wendy's had not commented by early afternoon.
Options add little at this price: the 12 million outstanding options carry a weighted average exercise price of $15.57, roughly double the offer, and the bidders' 194 million share count adds nothing for them.
Fair exit or low bid?
Holders who see a fair exit point to a 20% premium, all cash, no added debt, an owner that knows the business, and a company that closed 289 U.S. restaurants in the first half and faces maturing debt.
Holders who see a low bid point to a price below where the stock traded before the August reports, a bidder with a seat on the board, non-binding terms with unsized equity commitments, and timing that follows a nearly 30% slide.
What to watch
The special committee's response and choice of advisers, whether the equity commitments are named and sized, any revised or competing proposal, and Wendy's third-quarter results on Nov. 5.