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Why Wendy's Stock Blasted Almost 15% Higher Today
Key Points
It has apparently formed a consortium to back the effort.
The company promised to evaluate any potential offers.
Wendy's (NASDAQ: WEN) 's largest shareholder is reportedly preparing a bid to take the fast-food company private. In anticipation of a premium-priced buyout, investors piled into the stock on Wednesday, sending it to a nearly 15% gain.
Hungry for change
That morning, the Financial Times published a story stating that Trian Fund Management, headed by star investor Nelson Peltz, is leading the go-private effort. Citing unidentified "people familiar with the matter," the business newspaper said that Trian has backing from a consortium of investors. This group apparently includes UAE-based investment firm BlueFive Capital.
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The FT's sources said that the consortium might submit an offer for Wendy's within the next few weeks. As usual in such situations, they added that the timing could shift, or the bid not be submitted at all.
Trian has been a longtime institutional investor in Wendy's, having purchased its initial stake in 2005. It currently holds over 16% of the fast food company's equity. In February, Trian disclosed that it was soliciting potential investors to help evaluate strategic options, including a go-private bid.
The FT quoted Wendy's as saying that it "would thoroughly review any proposal submitted by Trian consistent with its fiduciary duties."
Trian has not yet officially commented on the article.
Slowdown in quick service
Although the reported move on Wendy's has been developing for months, it might be gathering momentum now for good reason. Recent research indicates that growth in the quick-service restaurant (QSR) industry has slowed, affecting sector stocks. On top of that, Wendy's share price slumped after the company announced a dividend cut last week.
The company might be better off in private hands, rather than as a publicly traded entity that has to keep shareholders happy. I think it's never wise to buy or hold onto a stock purely on the hope that its price will rise in a takeover. Especially after Wendy's price pop on Wednesday, I'd stick to that principle.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.