By Anuja Bharat Mistry and Svea Herbst-Bayliss
Oct 28 (Reuters) - Billionaire Nelson Peltz and several partners on Wednesday offered to buy burger chain Wendy's for $1.4 billion, arguing that the struggling fast-food chain needs a turnaround that would be best achieved out of the public eye.
Peltz's Trian Fund Management, a longtime Wendy's shareholder with a 16.3% stake in the fast-food chain along with related parties, is leading a group that offered to pay $7.35 per share in cash, according to a regulatory
filing.
The offer's roughly 20% premium to Wendy's closing price on Tuesday helped send the company's stock price up 15% to $7.10.
The bid would deepen a nearly two-decade relationship between Wendy's and Trian, which has maintained a significant presence on its board.
"We believe private ownership is the better path and provides the patient, long-duration capital needed to restore the business and the franchise system to a position of strength," the investor group wrote to the company's board.
Peltz is working with restaurant operator Flynn Group and investment firms BlueFive Capital and Sixth Street Partners on the bid, according to the filing.
Flynn operates more than 340 Wendy's restaurants and is one of the chain's largest US franchisees, as well as its master franchisee in Australia and New Zealand.
'CRITICAL JUNCTURE'
Trian said Wendy's was at a "critical juncture", citing pressure on US consumers, economic uncertainty, persistent commodity inflation and intensifying competition in the fast-food burger market.
Wendy's has been grappling with weakening sales as cost-conscious consumers pull back on dining out. The company withdrew its annual forecasts in August and CEO Bob Wright said at the time, "we are not performing in our potential".
"The business requires significant capital investment to de-lever and execute the strategic initiatives needed to turn system performance around," Peltz and Flynn Group's CEO Greg Flynn said in a letter to Wendy's. Wendy's had roughly $2.4 billion of net debt as of June 28.
Trian declined to comment beyond the filing and Wendy's did not respond to a Reuters request for comment.
"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," TD Cowen analysts said.
Earlier this year, Reuters and others reported that Trian and a consortium of investors were preparing a bid to take Wendy's private.
Reuters later reported that Trian had no immediate plans to make a take-private offer and had concerns about Wendy's performance, including its share price and valuation multiples, as well as its strategic direction.
The news of Wednesday's offer was first reported by the Wall Street Journal.
CIRCLING FOR YEARS
Wendy's has had a nearly two-decade-long relationship with Trian, with co-founder Peter May sitting on its board for 18 years. Last year, Bradley Peltz, one of Nelson Peltz's sons, joined the nine-person board. Nelson Peltz and another son, Matthew, had previously held board seats.
Trian also mulled taking Wendy's private in 2022 and then backed away from such plans in 2023.
In February, Peltz said the stock was undervalued and that his investment firm had spoken with potential financing sources about deals, including an acquisition or other major transactions.
Wendy's stock is down about 26% so far this year.
(Reporting by Anuja Bharat Mistry, Aishwarya Venugopal in Bengaluru and Svea Herbst-Bayliss in New York; Editing by Devika Syamnath)
