LOS ANGELES-Wendy's/Arby's Group plans to sell its struggling Arby's roast beef sandwich chain to focus on the Wendy's hamburger business, undoing a 2008 deal engineered by billionaire investor Nelson Peltz. The move comes as improving credit trends, a slowly healing US economy and private equity firms' appetite for deals are spurring some restaurant operators to put all or parts of their companies on the block.
Wendy's shares were up 8.7 per cent to US$4.86 in afternoon trade yesterday on the New York Stock Exchange, giving the combined company a market value of just over US$2 billion. The two fast-food chains were combined when Peltz's Triarc Cos, Arby's parent, bought Wendy's for US$2.2 billion to create the world's third-largest publicly held fast-food chain. Nearly all its restaurants are in the United States. Arby's generated about 30 per cent of the company's sales in its third quarter, but its performance-among the industry's worst-has been a drag on the overall company results.
Analysts said Arby's could be a tough sell. It is still in need of a turnaround and it might be hard to find another restaurant operator willing to buy it. A sale could bring in US$400 million to US$600 million, Oppenheimer analyst Matthew DiFrisco said in a client note. Arby's was in decline and suffering from neglect before its merger with Wendy's. Its signature sandwiches traditionally have sold at higher prices than offerings from other popular fast-food chains-which became a big minus when the US economy went sour. Last year, it rolled out a US$1 menu to compete with rivals.
The unit-which operates 3,700 restaurants and had total third quarter revenues of US$260.5 million-is heavily dependent on business from young males, who have been hard hit by massive job losses in construction and manufacturing. Wendy's and Arby's are both trailing McDonald's, which has used its large size, Dollar Menu and new beverages like lattes to draw a wide range of customers and pummel rivals. (Reuters)