Wendy to Nelson: Drop Dead

The financier Nelson Peltz, who runs the activist hedge fund Trian Partners, doesn't see the charm in the square hamburger served by the girl with red ponytails.

Trian owns nearly 10 percent of the outstanding shares of the fast food chain Wendy's and, judging by its latest letter to the company's management, Peltz is not happy with the direction the burger chain is heading. He's also not taking rejection too well.

According to the letter, a special committee formed by Wendy's to explore its strategic options rejected two different acquisition proposals by Trian in the last 24 hours. One called for a merger between Wendy's and Arby's, which is owned by Peltz's holding company Triarc. The other offer proposed an acquisition of Wendy's outright for "over $900 million in cash with the balance in stock."

Exactly how much is the balance in the offer? And what stock? The identity of the buyer wasn't entirely clear from the letter, but it's safe to assume it was Triarc, which is publicly traded.

Trian now plans to reach out to Wendy's shareholders for support. But it looks like Peltz is going to have to come up with something a bit more lucrative to win them over.

Sure, Wendy's has seen better days. But $900 million plus some unspecified amount of stock? The shareholders should actually be happy the committee rejected it. Its shares rose slightly in trading today.

Wendy's market capitalization is currently $2.2 billion. Add in the company's $570 million debt and subtract its $211 million in cash, and you arrive at an enterprise value of $2.5 billion. Even taking into consideration Peltz's 10 percent ownership, it's hard to conclude that a $900 million offer is worth taking.

Wendy's shares have struggled lately. But so have Triarc's, which makes the unspecified amount of stock included in the acquisition offer even harder for Wendy's shareholders to swallow. Its shares trade for $6.77, down from their 52-week high of $19.74.

by Megan Barnett

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