Wendy's considers possible sale amid turnaround
(Adds background on Nelson Peltz)
LOS ANGELES, April 25 (Reuters) - Wendy's International Inc. (WEN.N), which has been working to turn around its chain of hamburger restaurants, said on Wednesday it was reviewing strategic options to boost shareholder value, including a possible sale of the company.
The announcement, which sent Wendy's shares up 13.4 percent in extended trading, came as the company said its burger chain, No. 3 in the United States, reported a profit in the most recent quarter after posting an operating loss in the same period a year ago.
Wendy's, which is significantly smaller than rivals McDonald's Corp. (MCD.N) and Burger King Holdings Inc. (BKC.N), has been remodeling restaurants, selling outlets to franchisees and tweaking its menu as it works to to revitalize sales and profits at its more than 6,600 restaurants.
But one analyst said some investors doubted whether those moves would ultimately translate into higher operating profit, adding that many thought Wendy's might consider going private.
"Most of the Street is skeptical about their ability to realize that operating profit," said Larry Miller, restaurant analyst at RBC Capital Markets. "That's why the privatization thing has been bantered around."
Wendy's said first-quarter net income was $14.9 million, or 15 cents per share, compared with $51.2 million, or 45 cents per share, a year ago. Last year's profit included the results of two chains Wendy's recently sold, Tim Hortons and Baja Fresh Mexican Grill.
Income from continuing operations, which excludes the divested chains, was $14.5 million, or 15 cents per share, compared with a loss from continuing operations of $5.9 million, or 5 cents per share, last year.
Wall Street analysts, on average, had expected earnings of 13 cents per share, according to Reuters Estimates.
PRIVATE EQUITY TARGET?
Wendy's has suffered in recent years as McDonald's and Burger King turned around their businesses, stealing market share from their smaller competitor.
Experts said that made the brand a perfect fit for private equity firms, which typically buy companies, increase their borrowings and improve operations, then sell them at a profit.
"With everything that's been happening in the sector, you have to say 'Where does Wendy's go?'" said Howard Davidowitz of New York-based retail consulting firm Davidowitz & Associates Inc. "This is something that private equity is going to be interested in. This is a powerhouse brand."
Last year, billionaire investor Nelson Peltz, who questioned Wendy's strategy, placed three nominees on the company's board, and sped up a spin-off of its Tim Hortons coffeehouse chain. Peltz's deal with Wendy's also led to the sale of its Baja Fresh chain to an investment group. Continued...
