Wendy’s’s largest shareholder, activist hedge fund Tryon Partners, has indicated it is exploring a potential deal to buy the fast-food giant — a development that soared the company’s stock on Wednesday morning.
Tryon said it has informed Wendy’s board of directors that it is evaluating an offer to buy the company “alone or with a third party” to “increase shareholder value,” according to an SEC filing. The firm said the transaction could be a merger or acquisition that would result in a change of control over Wendy’s.
Wendy’s shares were trading nearly 10% higher on Wednesday as investors reacted to a potential sell-off.
Wendy’s reaffirmed its awareness of the Tryon Partners filing, noting that its “board of directors and management team regularly review the company’s strategic priorities and opportunities with the goal of maximizing value for all shareholders.” “
“Our board is committed to continuing to act in the best interest of the company and its shareholders,” Wendy’s said in a statement. “In line with its fiduciary duties, the Board will carefully review any proposal submitted by Tryon Partners.”
Trion’s leader already exercises significant control over Wendy’s operations, with three seats on its board. The hedge fund’s co-founder, billionaire Nelson Peltz, is Wendy’s chairman, while another co-founder Peter May is vice president.
According to Dow Jones data, Tryon owns more than 19% of Wendy’s shares, more than any other entity.
Wendy’s stock has fallen more than 23% over the past 12 months.
Troian’s website notes that the firm has “valued Wendy’s by divesting subsidiary brands, reducing overhead, improving restaurant operations, investing in growth, and returning capital to shareholders” since first investing in the company in 2005. Emphasis is placed on improvement.
The activist push will unfold as Wendy’s and other firms struggle with tough market conditions. The chain is attempting to woo customers with new offerings, such as an expanded breakfast menu.
While global sales at company-owned stores rose 2.4% in the company’s most recent earnings report, Wendy’s noted that higher operating costs related to items and labor were cutting into its profit margin.
Net income fell to $37.4 million in the first quarter, down about 10% from the same period a year ago.
Despite the tough market, Wendy’s is moving forward with plans to expand its number of restaurants — CEO Todd Penegore said earlier this month that the company aims to achieve net unit growth of 5% to 6% this year. was on the track.
Penegore said, “With strong franchise alignment behind our strategies, we are well positioned to win in this volatile environment, and we have strengthened our balance sheet with the successful loan enhancement transaction we recently completed “