Wendy's plummets after Nelson Peltz's fund rethinks taking the chain private

Shares of Wendy’s, which in August lost its position as the second-largest U.S. burger chain to Burger King, plunged more than 13% on Thursday. The trigger was reports that Nelson Peltz’s Trian Fund Management no longer plans to make a take-private bid for the company.

Wendy’s fell more than 13% on the Nasdaq on Thursday to $7.82 apiece. The decline followed a Reuters report that Trian Fund Management no longer planned to submit a bid to take the burger chain private, according to sources familiar with the matter.

The report came just two weeks after sources said that a consortium of investors was preparing to take Wendy's private. Based on Reuters reporting, the group could have included Trian, Bugatti-backed BlueFive Capital, and Flynn Group, a Wendy’s franchisee.

The investment firm has concerns about Wendy’s performance, including its recent share price and valuation multiples, as well as its current strategic direction, sources told Reuters.

In the second quarter, Wendy’s global systemwide sales fell 6.5% year over year to $3.4 billion, driven by an 8.2% top-line decline in the U.S. to $2.88 billion. Thus, Wendy’s lost its position as the second-largest U.S. burger chain by systemwide sales to Burger King in early August, CNBC reported. The news agency said this reflected diverging performance. Both chains had sought to overcome the sales slump that followed the pandemic, but Wendy’s reported declining U.S. same-restaurant sales at existing locations for six consecutive quarters, while Burger King posted growth for five consecutive quarters.

On Monday, Wendy’s CEO Bob Wright issued a rare corporate mea culpa, telling the Wall Street Journal that the chain had sacrificed ingredient quality to cut costs, contributing to its loss of the No. 2 position. “We certainly have inconsistent operations,” Wright said. “We have some areas that we can focus on there.” His new five-point strategy includes initiatives to improve food quality and value, operations, restaurant upgrades, and marketing.

Also on Monday, the company announced the appointment of former McDonald’s executive Tariq Hassan to the newly created role of chief marketing and customer growth officer. McDonald’s has long led the industry in sales and restaurant count.

By pulling back from a possible acquisition of Wendy’s, Trian could be giving Wright time to implement his turnaround plan, Reuters reported. A Trian representative declined to comment to Reuters, while Wendy’s did not respond to a request for comment either.

Wendy’s shares have now fallen 6% year to date. Wall Street is cautious on the stock. According to MarketWatch data, it has 18 “hold” ratings versus five “sell” and three “buy” calls. The average target price is $7.80 per share, in line with the last close.