Investor: Wendy's Should Spin Off All Tim Hortons
WASHINGTON/LOS ANGELES – Billionaire investor Nelson Peltz told No. 3 hamburger chain Wendy's International Inc. (WEN) that it should spin off all of its Tim Hortons coffee-shop chain and sell its ancillary brands, according to a regulatory filing Tuesday.
Shares of Wendy's rose as much as 7.7 percent on the New York Stock Exchange following the announcement, which marked the second time this year a major institutional shareholder has pushed for change at the fast-food chain.
In July, Wendy's said it would spin off 15 to 18 percent of the Canada-based chain so it could focus on its embattled flagship hamburger brand, which competes with larger rivals McDonald's Corp. (MCD) and Burger King, among other chains. On Dec. 1, Tim Hortons filed for a $600 million initial public offering.
The company announced the plan after activist hedge fund Pershing Square Capital Management had pushed for several months for a spin-off of Tim Hortons, which has been expanding into the United States.
Dublin, Ohio-based Wendy's has been struggling to reverse sluggish sales at its namesake hamburger restaurants, which have been hard hit by stepped-up competition from a revitalized McDonald's.
Peltz's overhaul plan includes the sale of Wendy's subsidiary brands Baja Fresh, Cafe Express and Pasta Pomodoro, he said in a U.S. Securities and Exchange Commission filing.
He also said the company should reevaluate some components of its previously announced strategic initiatives and should significantly reduce costs at its Wendy's Old Fashioned Hamburgers business.
Peltz said he has been denied a meeting with Wendy's Chief Executive John Schuessler. A Wendy's spokesman declined to comment on the filing.
One analyst said the string of recent proposals was a good thing for Wendy's shareholders.
"The gist of these proposals has been to extract some cash from the company," said Dan Popowics, an equity analyst with Fifth Third Asset Management in Cincinnati. "The more the better ... with these proposals in the view of shareholders."
Peltz said he may in the future conduct a proxy solicitation for a minority of the board of directors at Wendy's next annual meeting, buy or sell additional shares, or communicate with the company or other investors.
But Peltz said he has no intention, either alone or with another party, to gain control of Wendy's.
Wendy's stock was up $3.63, or 7.1 percent, at $55 Tuesday. The shares hit a high of $55.35 earlier in the session.
Wendy's shares have climbed over 40 percent this year, mainly due to investor enthusiasm about restructuring initiatives such as the Tim Hortons spin-off. That compares with a 5.4 percent rise in the Standard & Poor's Restaurants index, of which Wendy's is a component.