Wendy’s, struggling with beef prices and growing competition, gets a buyout offer

Wendy’s shares jumped 15 per cent at the opening bell Wednesday after noted investor Nelson Peltz made an offer to buy the chain, which has been struggling with high beef prices and ageing stores.

Peltz’s Trian Fund Management and several partners are offering Wendy’s US$7.35 per share in cash, or a premium of nearly 19 per cent over the stock’s closing price on Tuesday, in a deal that would take the company private.

Wendy’s, which is based in Dublin, Ohio, declined to comment Wednesday. At the end of last year, Wendy’s had 5,969 restaurants in the US and 1,428 outlets in 38 countries.

Wendy’s, founded in 1969 by Dave Thomas and named after his daughter, is known for its square burgers and Frosty desserts. The fast-growing chain introduced the drive-thru window in 1970 and went public in 1976. In the 1980s, as it jockeyed for sales with McDonald’s and Burger King, Wendy’s launched salad bars and ran its iconic “Where’s the beef?” ad campaign.

But as the fast-food market grew even more competitive and rival burger-focused chains like In-N-Out and Five Guys expanded, Wendy’s fell behind. Wendy’s share of US burger chain sales fell from 11.5 per cent in 2019 to 10.4 per cent last year, according to Technomic, a market research company.

In recent years, inflation has also hurt Wendy’s and other US fast-food chains, who have seen traffic from lower-income consumers fall as they raised prices to combat rising labour, food, and packaging costs.

Wendy’s has been closing outdated US restaurants so it can focus on its more profitable locations. The company closed 240 restaurants in 2024 and said earlier this year that it planned to shutter up to 358 locations this year.

Then, last month, one of the largest US franchisees for Wendy’s filed for bankruptcy protection after the chain tried to terminate its franchise agreement. Michigan-based Meritage Hospitality Group operates 314 Wendy’s restaurants in 15 states.

In a letter to the company’s board of directors, Peltz said going private “will deliver the best outcome for the broader stakeholder base.”

“Wendy’s sits at a critical juncture,” Peltz wrote. “The external environment has become increasingly challenging given the significant pressures on the US consumer, economic uncertainty, persistent commodity inflation and intensifying competition, particularly within the QSR (quick service restaurant) burger category.”

Peltz has invested in companies from Procter & Gamble and Disney to DuPont. According to a regulatory document filed Wednesday, Trian’s stake in Wendy’s totals 16.3 per cent.

Peltz considered a take-private bid for Wendy’s in 2022 but told the company in January 2023 that he had decided against it, citing its improved business momentum, according to TD Cowen analyst Andrew Charles.

Charles said an independent special committee is expected to evaluate the proposal and both parties have entered into a confidentiality arrangement.

“In our view, a take-private makes sense as Wendy’s turnaround is likely to be prolonged given the challenged state of the lower-income consumer and soft state of the quick service burger category,” Charles wrote Wednesday in a note to investors.

Wendy’s is scheduled to report its quarterly financial results next week. Analysts expect the company to post earnings of 9 cents per share on sales of US$531 million, according to FactSet.

Shares rose 88 cents to US$7.01 Wednesday. They have fallen 26 per cent since the start of this year.

– AP