Financing

Nelson Peltz opts not to buy Wendy’s as the company reorganizes

The burger chain’s largest shareholder and chairman opted not to seek a deal for the company. Kurt Kane, the burger chain's U.S. president, is leaving as part of a broad corporate restructuring.
Wendy's sale
Wendy's will not be sold and instead plans to reorganize its business and send more cash to shareholders. / Photograph: Shutterstock.

Nelson Peltz, Wendy’s chairman and its largest shareholder, said in a filing on Friday that he has opted not to buy the company and instead endorsed a plan by the burger chain to send more cash to shareholders.

The announcement came as Wendy’s also announced plans for a broad corporate restructuring that will remove layers of corporate management and speed decision-making. That reorganization is leaving Kurt Kane, president of Wendy’s U.S. business, out of a job.

Peltz’s Trian Partners, which owns more than 19% of Wendy’s shares, had said in May that it was exploring a potential deal for the chain. Instead, Trian said in a filing on Friday that it has “determined not to propose such a transaction.”

Trian said its decision was based on Wendy’s “current business momentum” and “strong liquidity position,” coupled with the company’s announcement Friday that it plans to double its quarterly dividend and spend $500 million on share buybacks.

“As the largest shareholder of the company,” Trian said in its filing, it believes “strongly in the future of the company.”

Wendy’s said its same-store sales rose 6.4% in the fourth quarter worldwide, including 5.9% in the U.S., but CEO Todd Penegor said in a conference call on Friday morning that sales accelerated on a two-year basis compared with the third quarter.

Wendy’s said that its breakfast business performed well, thanks to French Toast Sticks and a $3 breakfast deal. The company also generated sales with its Peppermint Frosty and a $5 Biggie Bag value promotion.

The sales led to improved profit margins at corporate locations. Profit margins at company locations were 300 basis points higher in the fourth quarter than in the first quarter, Wendy’s said. Wendy’s generated $536.5 million in revenues and $84 million in operating profit in the fourth quarter.

Wendy’s plans to double its quarterly dividend to 25 cents per share. For Peltz, whose Trian fund owns more than 41 million shares, that suggests some $40 million in dividends per year.

Details remain uncertain on the corporate reorganization. The company said it plans a “broader redesign of its organizational structure” to improve organizational efficiency and streamline decision-making.

It’s uncertain whether the reorganization will involve layoffs, but the company expects its corporate overhead costs will be “flat” over the next two years despite inflation.

Wendy’s had been operating with a two-tiered organizational structure. Kane oversaw the company’s U.S. business and Abigail Pringle was the president of its international business. Wendy’s said in a filing that Kane’s position has been eliminated as part of the corporate redesign and that he is leaving the company.

Meanwhile, Leigh Burnside, who had served as CFO of the U.S. business and the company’s chief accounting officer, is leaving Wendy’s to take a CFO position with another company. Suzanne Thuerk, VP of accounting, has been appointed chief accounting officer in her place.

“We have two unit presidents who have a lot of autonomy, driving their business, and it’s served us well,” Penegor said. “But we do need to have a global mindset. It will bring me closer to the business.”

A company spokesperson said Wendy's is still evaluating plans for the reorganization and could not share details at this time. Penegor said Friday that changes had to be made in senior management first before the company could start the work of its corporate reorganization. 

Wendy’s reorganization announcement comes just one week after McDonald’s announced a broad reorganization of its own, with similar goals of improving efficiency. Both brands have been outperforming the broader market in recent quarters. “We’re starting from a position of strength,” Penegor said.

UPDATE: This story has been updated to include additional details. 

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