Wendy’s announced August 16 that it has accepted an offer from Inspire Brands, the newly named owner of Arby’s, Buffalo Wild Wings, and fast casual R Taco, to sell its 12.3 percent ownership interest back to the company for $450 million. The deal represents a 38 percent premium on Wendy’s previous valuation of the investment, and Wendy’s is expecting about $335 million of cash proceeds net of tax.
“We have benefited from and enjoyed our partnership with Inspire, and we wish Paul Brown and the team continued success in the future," said Todd Penegor, Wendy's president and chief executive officer, in a statement. "The opportunity to monetize our investment in Inspire Brands will allow us to invest in future growth for the Wendy's brand and company, which is our top priority. The flexibility provided by the sale proceeds and the additional share repurchase authorization through 2019 will also allow us to continue to create value for our shareholders."
Brown, formerly the CEO of Arby’s, was named to the same role at Inspire Brands in February, when the company formed following its $2.4 billion purchase of Buffalo Wild Wings. Inspire was co-founded by Neal Aronson, who started Roark Capital Group.
Roark, a private-equity firm that’s portfolio also includes Jim ‘N Nick’s Bar-B-Q, CKE Restaurants (parent company of Carl’s Jr. and Hardee’s), Corner Bakery, FOCUS Brands (Auntie Anne’s Pretzels, Carvel Ice Cream, Cinnabon, McAlister’s Deli, Moe’s Southwest Grill, and Schlotzsky’s), Il Fornaio, Jimmy John’s, Miller’s Ale House, and Naf Naf Middle Eastern Grill, took a majority stake in Arby’s from Wendy’s in 2011.
Arby’s first acquired Wendy’s for $2.34 billion in April 2008. Triarc Companies Inc., owned by billionaire investor Nelson Peltz, made the move in an all-stock deal after Wendy’s rejected at least two buyout offers from the company. Roark’s purchase in 2011 for $430 million was for 81.5 percent of Arby’s, which left the Wendy’s/Arby’s Group with an 18.5 percent share in the company.
Wendy’s declined to participate in Arby’s purchase of Buffalo Wild Wings, saying at the time it would rather reserve its cash for investments related to the Wendy’s brand. This took its 18.5 percent interest down to 12.3 percent.
“The sale of our stake in Inspire Brands for $450 million is a great return on this investment for our shareholders," said Nelson Peltz, chairman of the board of directors at Wendy’s. "Over the past seven years, Wendy's and its shareholders have benefitted from more than $100 million in distributions and the monetization of this investment carries a 38 percent premium over its most recent valuation."
Wendy’s said it would use the cash “to invest in the growth of the Wendy’s brand and company and increase its share repurchase program.” Wendy’s board authorized a new share repurchase program for up to $100 million of the company’s common stock through December 27, 2019. This builds on Wendy’s current $175 million share repurchase authorization, which expires March 3, 2019, and had $93.1 million remaining as of August 1.
Wendy’s reported same-store sales gains of 1.9 percent in the second quarter, giving the chain 22 consecutive periods of positive comps. Wendy’s achieved quarterly revenues of $411 million, a 3.9 percent increase from the year-ago period.