Wendy's/Arby's to sell Arby's to Roark Capital for $130 million

Mon Jun 13, 2011 8:39am EDT

A signage promotes Arby fast food restaurant's new $1 menu in Hollywood, California May 14, 2010. REUTERS/Fred Prouser

A signage promotes Arby fast food restaurant's new $1 menu in Hollywood, California May 14, 2010.

Credit: Reuters/Fred Prouser

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(Reuters) - Wendy's/Arby's Group Inc WEN.N said it will sell a majority stake in its struggling roast beef sandwich chain, Arby's Restaurant Group Inc, to private equity firm Roark Capital Group for about $130 million in cash.

The third-biggest U.S. fast-food restaurant operator has been grappling with rising costs of commodities like beef, bacon, fryer oil and dairy.

Wendy's/Arby's has also struggled with rising competition from rivals like McDonald's Corp (MCD.N) and Yum Brands Inc (YUM.N), which have larger international exposure.

In January, the company said it plans to sell its Arby's business to focus on the Wendy's hamburger business.

Roark also committed to invest in Arby's, under certain circumstances, an additional $50 million through 2013 for preferred stock in return.

Wendy's/Arby's will retain 18.5 percent ownership of Arby's valued at about $30 million, it said in a statement.

With the transaction, Wendy's/Arby's Group said it will also get an income tax benefit of about $80 million that the company expects to realize over the next few years.

Roark Capital will also assume about $190 million in debt.

The two fast-food chains were combined in 2008 when billionaire investor Nelson Peltz's Triarc Cos, Arby's then parent, bought Wendy's for $2.2 billion to create the world's third-largest publicly held fast-food chain.

(Reporting by Arpita Mukherjee in Bangalore; Editing by Don Sebastian)

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