Wendy's Pondering Baja Fresh Sale

COLUMBUS, Ohio – Wendy's International Inc. (WEN) is exploring a sale of its underperforming Baja Fresh Mexican Grill unit and plans to boost its board ranks with three new directors endorsed by an influential investor.

Wendy's also will speed the public offering and spin off its Tim Hortons chain, which sells coffee and doughnuts, aiming to complete that process by year's end.

The decision Thursday by the No. 3 U.S. hamburger chain amounted to a capitulation to pressure for better returns from billionaire investor Nelson Peltz's Trian Partners and Sandell Asset Management Corp.

Wendy's and Trian Fund Management LP, which manages Trian Partners, said Jerry W. Levin, Peter H. Rothschild and Stuart I. Oran — all of whom have investment backgrounds — will join the board Monday, increasing it to 15.

The board changes are part of an agreement between Wendy's, Trian Partners and Among other commitments, Trian and Sandell have agreed to vote their shares in favor of the director nominees at Wendy's annual meeting in April.

In a proposal filed with the Securities and Exchange Commission in December, Trian Partners said Wendy's should spin off all of Tim Hortons, sell Baja Fresh and interests in the Cafe Express and Pasta Pomodoro chains. Wendy's also should cut expenses at its hamburger restaurants by $200 million, Trian said.

In the past two years, Wendy's has retooled the Baja Fresh menu and closed 20 of the lowest-performing Baja restaurants among the more than 300 stores. In 2004, the parent company took a $190 million pretax charge to write down the value of the sluggish subsidiary.

Wendy's acquired the Thousand Oaks, Calif. chain in June 2002.

Wendy's earlier had announced plans to spin off a portion of Tim Hortons after another shareholder, Pershing Square Capital Management LLC, pushed Wendy's to make changes.

Tim Hortons Inc. estimates it will offer 29 million shares at $18 to $20 per share in the IPO, which is expected later this month.

Wendy's had intended to spin off the remaining stake within nine to 18 months after the IPO, according to the filing with the Securities and Exchange Commission. The company told investors in early February that the spinoff cannot be done faster for tax reasons.

The IPO could raise $580 million for Tim Hortons, most of which will be used to pay off debt it owes the parent company.

Trian has been pressuring Wendy's to speed up the spinoff of Tim Hortons. On Jan. 17, Trian exercised options to buy about 5.3 million shares, increasing its stake to 5.5 percent from about 1 percent.

Wendy's revenue for 2005 rose 4 percent to $3.78 billion from $3.64 billion in 2004.

But sales at Wendy's locations open at least one year, a key measure of retail performance, fell 3.7 percent for all of 2005. It was the first such decline in 18 years.

Levin is chairman and chief executive of JW Levin Partners, another management and investment firm. He also has served as chairman and CEO of American Household Inc. and of Revlon Inc.

Rothschild is managing member of the Daroth Capital investment and advising firm and sits on the board of directors of Deerfield Triarc Capital Corp.

Oran is the managing member of the Roxbury Capital Group merchant banking firm he founded in 2002. He has held senior executive positions at UAL Corp. and its operating subsidiary, United Airlines.