Wendy’s has rejected a $1.4 billion hostile takeover bid from a group led by Trian Partners, saying the offer undervalues the burger chain and is not in shareholders’ best interests.
The company’s board unanimously turned down the proposal, which would pay $7.35 per share. Wendy’s shares were trading at $7.75 before markets opened on Thursday.
The bid was submitted by Trian Partners, the asset management firm founded by activist investor Nelson Peltz, alongside Flynn Group LP, BlueFive Capital and Sixth Street Partners.
Art Winkleblack, chairman of Wendy’s board, said an independent committee had assessed the offer and concluded that it “substantially undervalues Wendy’s standalone prospects and long-term earnings potential”. He also expressed confidence in chief executive Bob Wright.
Wendy’s faces falling sales
The takeover proposal comes as Wendy’s contends with slowing revenue growth and a falling share price. Its stock has declined by nearly 14% over the past 12 months, although the company remains profitable.
In its latest results, Wendy’s reported that US same-restaurant sales fell by 5.7% in the third quarter compared with the same period a year earlier. Revenue declined to $547 million from $549.5 million.
Rising inflation and higher beef costs have forced the chain to increase prices, putting pressure on customer demand. Wendy’s has also identified staffing, employee training, drive-through order handling and marketing as operational challenges.
Mr Wright told Wall Street analysts in August that the company needed to improve food quality and had moved away from some of the standards that once set it apart, including its use of fresh, never-frozen beef and produce prepared daily.
Wendy’s is not alone in facing weaker demand across the fast-food industry. McDonald’s said on Wednesday that it would introduce a new range of affordable options next year in an effort to increase sales.
