Dublin, Ohio-based burger chain Wendy’s is flirting with the idea of a possible sale or merger according to Nelson Peltz, Wendy’s Chairman – but it could be a hard sell for many investors.
In a Securities and Exchange Commission filing, Peltz’s management fund, Trian Partners, disclosed that they’re looking to make a deal that would ultimately “enhance trade holder value.” Trian, who owns 19.4% of the chain, has retained advisors who will help explore this potential trade. As a result of this announcement, Wendy’s stock jumped up 11% as excited investors praised the call for a merger. That being said, another management fund may be hesitant to explore an acquisition of Wendy’s due to its slight downswing over the past few years.
While Wendy’s had revenues of $1.9 billion in 2021, this is still down from $2.45 billion in 2007. This is due to higher costs of supplies and labor, says Cowen restaurant analyst Andrew Charles. Additionally, Charles adds that many brands are already affiliated with fast-food chains. They also see McDonalds and Burger King, the two fast food burger chains larger than the Wendy’s franchise, as too much competition. Investors may also assume that the company’s issue with managing pandemic-era cash flow represents a red flag regarding the company’s future.
However, Wendy’s does show promise, which can renew interest for buyers. In general, over the long term, its profits are up $200.4 million from last year. This is a striking rise from its $87.9 million profit margin in 2007, before its 2008 merger with Triarc Companies Inc. The chain’s continued success during the pandemic can be attributed to its investment in a breakfast menu, say financial experts from CNN. Immediately after its debut of enhanced breakfast items, sales rose by 1.1%. Wendy’s is continuing to utilize this potentially profitable trend by consistently debuting new breakfast menu items, such as the Hot Chicken Honey Sandwich, released in February 2022.