Skip navigation
Wendy’s latest suitor questions valuation of franchisor

Wendy’s latest suitor questions valuation of franchisor

DUBLIN OHIO. Wendy’s International Inc., a question facing operators and onlookers is how much the No. 3 burger brand is worth, especially if the chain’s same-store sales keep sliding and thousands of restaurant remodelings are needed, as suggested by one would-be buyer and large Wendy’s franchisee. —With four identified suitors vying for

Gene Carlisle, chairman and founder of Memphis, Tenn.-based Carlisle Corp., operator of about 100 Wendy’s units in the Southeast, is the latest party to be identified as a potential bidder for Wendy’s. He has said the company may be worth only $2.5 billion—not the $3.6 billion figure once mentioned by potential rival bidder Nelson Peltz, head of Arby’s parent Triarc cos. —With four identified suitors vying for

Wendy’s stock closed at $34.50 on Oct. 5 , placing its market value at around $3.01 billion. —With four identified suitors vying for

“If you bought [Wendy’s stock] at today’s prices, you’re paying a premium to performance,” Carlisle was quoted as saying in an Oct. 3 Columbus, Ohio, Dispatch article. —With four identified suitors vying for

Carlisle suggested that half the 6,600-unit Wendy’s system needs to be “massively renovated or replaced” within the next five years, much like the McDonald’s system of years ago. McDonald’s restaurant and menu upgrades have paid dividends in the form of a string of positive same-store sales and record profits. —With four identified suitors vying for

Upgrades at Wendy’s would not be cheap, Carlisle said, and should factor into any purchase price. He estimated that per-restaurant overhaul costs would run $500,000 and $1.5 million. That would total $1.4 billion to $4.5 billion in capital outlays, mostly by franchisees. —With four identified suitors vying for

Carlisle did not return phone calls seeking additional comment. —With four identified suitors vying for

Officials at Dublin-based Wendy’s have not discussed the scope of upgrades needed by the chain’s restaurants. The company has stated that it would invest up to $110 million this year on renovations of both corporate and franchised units. But because of the company’s strategic review, including a consideration of a possible sale of the company, Wendy’s has not forecast a capital budget for the next two years. In 2006, Wendy’s said it would invest $1 billion—garnered mainly through its sale of Tim Hortons—in core-business improvements, including advertising, financing for franchisees’ kitchen conversions to double-sided grills, and refurbishing of older restaurants. —With four identified suitors vying for

In addition to speculation about the need for massive overhauls, Wendy’s is struggling against down-trending same-store sales. In this year’s first quarter, they rose 3.8 percent at U.S.-based corporate restaurants, but have decelerated since then. Same-store store sales rose just 0.7 percent for the second quarter and were up only 0.2 percent for the third quarter. —With four identified suitors vying for

Wendy’s expanding test of a breakfast menu, currently in about 750 units, is expected to help same-store sales, but the daypart’s profitability is questionable. —With four identified suitors vying for

With weakening performance, most speculation has centered on a sale of the company. Wendy’s officials would not comment on its strategic review, which began in April. The company still is considering three options, including a recapitalization or a sale of the company. All options are being “actively pursued,” spokesman Denny Lynch said. —With four identified suitors vying for

Some observers say Wendy’s could follow the course taken by Applebee’s, which also explored a recapitalization, but eventually took a buyout offer from IHOP Corp. as volatile credit markets and soft same-store sales weakened the confidence of Applebee’s board that a turnaround funded by a securitization could be successful. The $2.1 billion deal for Applebee’s will be put to shareholders for their approval Oct. 30. —With four identified suitors vying for

If Wendy’s is to be sold, it is unlikely it would fetch a price above its current trading level, securities analysts have said. —With four identified suitors vying for

Wendy’s has estimated its 2007 earnings before interest, taxes, depreciation and amortization at between $295 million and $315 million. Assuming a midpoint figure and a multiple of 11 or 12 times EBITDA, which would exceed that for most recent restaurant buyouts, Wendy’s takeout value would be between $34 to $37 per share, according to John S. Glass of CIBC World Markets. That equates to a purchase price of $2.9 billion to $3.2 billion. —With four identified suitors vying for

Before Carlisle, the only publicly stated buyout number came from Peltz, who has said he could be willing to pay as much as $41 per share, or $3.6 billion. —With four identified suitors vying for

Peltz, however, holds the interesting position of being both a potential seller of the 9.8-percent stake in Wendy’s held by his Trian Fund Management group, and a buyer of Wendy’s, through Triarc, where he is nonexecutive chairman and holds a controlling stake. Peltz signed a confidentiality pact with Wendy’s in August in order to pursue a potential bid. —With four identified suitors vying for

Peltz’s motives, however, could include driving up the buyout price, according to a restaurant investment banker familiar with the Wendy’s process who requested anonymity. Peltz then could sell his shares for a premium, or if the buyout price fell he could best other bidders and end up owning Wendy’s, the banker said. Wendy’s confidentiality pact with Peltz stipulates that Peltz can’t make an offer or buy more Wendy’s shares until December, suggesting that a deal before year-end is unlikely. —With four identified suitors vying for

Another Wendy’s franchisee, J. David Karam of 134-unit Cedar Enterprises of Columbus, Ohio, also has expressed interest in buying Wendy’s. But he too has said it currently is valued too highly. A recently identified adviser and potential backer of Karam’s is former Wendy’s operations vice president Joe Drury, who recently sold the Bojangles’ chicken chain. Drury has been quoted as saying that a buyout by Arby’s parent Triarc would not be good for Wendy’s —With four identified suitors vying for

The other identified suitor is a consortium of the private-equity firms Thomas H. Lee Partners, Oaktree Capital Management and Ares Management, along with Fidelity National Financial, which is led by former CKE Restaurants chairman and CEO William Foley. —With four identified suitors vying for

However, the investment banker who requested anonymity said reports that more than a dozen unidentified suitors are interested in Wendy’s may only be a ploy to use the media to drum up interest in the company. None of the identified suitors could be reached for comment by presstime. —With four identified suitors vying for

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.