Wendy’s has rejected a take-private proposal from an investor group led by Nelson Peltz’s Trian Fund Management, saying the offer substantially undervalues the company, and has adopted a shareholder rights plan to block the group from building control without board approval.
The group, which includes Flynn Group, BlueFive Capital and Sixth Street Partners, offered 7.35 dollars per share in cash on October 28 for the shares it does not already own, valuing Wendy’s equity at about 1.4 billion dollars. The price was a premium of about 20 percent at the time it was made. Trian and related parties hold about 16.3 percent of Wendy’s, and Flynn Group operates more than 340 Wendy’s restaurants.
An independent committee of the board, formed in February after Trian’s regulatory filing on its stake and advised by financial and legal advisers, unanimously concluded the proposal did not reflect the potential benefits of the company’s turnaround plan, known as Dave’s Way, or its long term earnings potential. Board chairman Art Winkleblack, a member of the committee, said the offer substantially undervalues Wendy’s standalone prospects.
The rights plan, adopted on November 4 and running for one year, is triggered if an investor or group crosses 15 percent ownership, allowing other shareholders to buy stock at a discount. It is designed to stop any shareholder gaining control without paying a premium the board accepts, and it can be terminated early.
The bid arrived about three months after Wendy’s withdrew its annual forecast, cut its dividend and launched the turnaround under new chief executive Bob Wright. Trian must now decide whether to raise its offer, run a proxy fight, or back the board’s plan.