Fast food chain Wendy’s has been tipped to be sold as the burger chain’s biggest shareholder announced plans to “explore and evaluate” a transaction to boost the company’s sagging stock prices.
“Such a potential transaction could include an acquisition, business combination, such as a merger or other transactions that would result in the acquisition of control of the company by the filing persons,” wrote the filing.
Wendy’s has seen profit margins drop in the highly competitive fast-food market amid rising commodity and labor costs. The fast food chain attempted to recover by adding breakfast options to their menu when the COVID-19 pandemic began, but Wendy’s shares have lost nearly a third of their value this year.
Billionaire investor Nelson Peltz, director at Wendy’s since 2008, disclosed in a federal regulatory filing Tuesday that he owns 19.4% of the company’s stock through private equity fund, Trian partners. The firm, which was founded by Peltz, first invested in Wendy’s in 2005, when the fund was initially created. “At that time, Wendy’s was one of the most beloved brands,” said the firm in its portfolio listing.
On Wednesday morning, the fast-food chain’s stock jumped 11%. But, despite the eagerness of investors to hump at the opportunity, the SEC filing said there could be no deal as analysts warned that there was too much competition in the market.
Cowan restaurant analyst Andrew Charles chimed in with a note on Tuesday, saying: “We believe a sale of Wendy’s may not be straightforward.” However, he also added that many large restaurant owners already have a burger chain in their portfolio. Wendy’s responded that it would consider Trian’s offer.
“The Wendy’s Company’s Board of Directors and Management team regularly review the company’s strategic priorities and opportunities with the goal of maximizing the value for all stockholders,” the company wrote in a statement. “Our board is committed to continuing to act in the best interest of the company and its stockholders. Consistent with its fiduciary duties, the board will carefully review any proposal submitted by Trian Partners.”