UPDATE 3-Peltz's Triarc to buy Wendy's for $2.4 billion
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LOS ANGELES, April 24 (Reuters) - Wendy's International Inc (WEN.N) has agreed to be bought by Arby's owner Triarc Cos Inc TRY.N, the investment arm of billionaire investor Nelson Peltz, in a deal valued at about $2.4 billion, sending shares in each company higher.
The purchase would put the two fast-food chains under the same umbrella and could help the No. 3 hamburger restaurant lower costs as it struggles to regain market share lost to rivals like McDonald's Corp (MCD.N), Burger King Holdings Inc (BKC.N) and CKE Restaurants Inc's (CKR.N) Carl's Jr.
Wendy's put itself up for sale last June, under pressure from Peltz, who controls nearly 10 percent of Wendy's and has clamored for better financial results at the chain.
"I can see how Wendy's is more valuable in the hands of Triarc," Morningstar restaurant analyst John Owens said. "There can be some significant cost savings here."
Under the terms of the deal, Wendy's shareholders would receive 4.25 Class A Triarc shares for each Wendy's share they own, the companies said on Thursday.
Triarc shares closed at $6.30 on Wednesday, which would assign a value of $26.78 to Wendy's shares, a 5.7 percent premium to their closing price of $25.32 on Wednesday. Wendy's had 88.3 million shares outstanding.
"The deal values Wendy's at roughly 8- to 8.5-times adjusted 2007 EBITDA (earnings before interest, taxes, depreciation and amortization)," according to a Peltz spokesman.
Shares of Triarc were up 15 cents, or 2.4 percent, to $6.45 in afternoon trade on the New York Stock Exchange. Wendy's stock was up $1.0117, or 4 percent, to $26.33.
Investment banks JPMorgan Chase and Lehman Brothers advised Wendy's on the transaction. The deal, subject to regulatory approvals, is expected to close in the second half of 2008.
A Triarc spokesman said Wendy's current shareholders would control 80 percent of the combined company, with Triarc shareholders controlling the remaining 20 percent.
NEW DIRECTION
The change in ownership would mark a new chapter for Wendy's, started in 1969 by former pitchman Dave Thomas and named for one of his daughters. The company -- which has suffered from a lack of investment amid uncertainty over its future ownership -- is probably best known for its short-lived, but wildly popular "Where's the beef?" television ads from the late 1980s.
Triarc would change its corporate name to include "Wendy's," but Arby's and Wendy's would operate as autonomous units headquartered in Atlanta, Georgia, and Dublin, Ohio, respectively, both companies said.
Plans for the merged company -- which would have about 10,000 restaurants -- include expansion, primarily focused on breakfast meals, global expansion for both brands and growth through future acquisitions and new unit development.
Roland Smith, Triarc's chief executive, would continue in that role for the combined company and would also become CEO of the Wendy's brand.
"Working together with the Wendy's team, we expect to improve margins significantly at Wendy's company-owned stores," Smith said.
WENDY'S PROFIT DROPS
Wendy's also reported that first-quarter income from continuing operations fell 72 percent from a year earlier to $4.1 million, or 5 cents per share.
The results included pretax expenses of $6.7 million related to the special committee that was weighing the sale and $200,000 of pretax restructuring charges.
Sales at company-owned stores open at least 15 months fell 1.6 percent in the first quarter, while sales at restaurants owned by franchisees were down 0.1 percent.
"We are not satisfied with first-quarter results. We know we must do better and we are focused on driving sales and performance in future quarters," said Kerrii Anderson, the current chief executive of Wendy's, which has 6,000 outlets in the United States and about 300 international stores.
The company launched a new advertising campaign and introduced new hamburgers and sandwich wraps, but it continues to lag rivals McDonald's and Burger King, which have seen results boosted by international sales. (Additional reporting by Jessica Hall and Jui Chakravorty, editing by Patrick Fitzgibbons and Gerald E. McCormick)
