Wendy’s International, Inc. (NYSE:WEN) announced today that the Special Committee of its Board of Directors, which is reviewing the company’s strategic options, has decided to explore a possible sale of the company. There is no specific timetable for the process.
“The Special Committee has determined that the exploration of a sale is the appropriate next step in the investigation of value-creating alternatives for our stakeholders,” says James V. Pickett, chairman of the board and the Special Committee. “While a sale remains only one of the alternatives under consideration, we believe it merits more thorough examination.
“Our goal is to move forward expeditiously and to minimize disruption to the company and its operations,” says Pickett. “We want management and our operators to focus on executing Wendy’s business plan to grow sales and margins.”
JP Morgan, as lead advisor, and Lehman Brothers Inc., as co-advisor, will conduct the sale exploration process in conjunction with the Special Committee.
The Special Committee is also evaluating a possible securitization financing. Such a securitization could be used by a potential buyer or in a recapitalization of the Company. Lehman Brothers, as lead structuring advisor, and JP Morgan, as co-structuring advisor, are leading this evaluation on behalf of the Special Committee.
There is no assurance that the steps announced today will result in any changes to the Company’s current plans, or that any transaction will be consummated. A sale transaction would require approval by the full Board of Directors and shareholders. In addition, the steps announced today do not preclude the possibility of the Company pursuing other strategic alternatives in the future.
Wendy’s plans to report developments regarding the Special Committee’s actions only as circumstances warrant.
Additionally, Wendy’s announced today that it is revising its 2007 outlook for earnings before interest taxes depreciation and amortization (EBITDA) and earnings per share (EPS) from continuing operations.
Wendy’s revised range for EBITDA is $295-315 million, compared to previous guidance of $330-340 million. The revised range is a 33-42 percent increase over 2006 adjusted EBITDA from continuing operations of $221 million. The company’s revised range for EPS is $1.09-1.23 per share, compared to Wendy’s previous guidance of $1.26-1.32 issued on March 20.
The primary reasons for the revised outlook are lower-than-planned same-store sales and higher-than-expected commodity costs. Same-store sales were up 3.8 percent at U.S. company restaurants in the 2007 first quarter and are up 0.7 percent in the 2007 second quarter through June 15.
The revised earnings outlook excludes expenses related to the Board’s Special Committee activities, up to $60 million in pension settlement costs that Wendy’s noted in February (some of these costs are expected to occur in 2007), and any potential restructuring charges.
“Our strategy to revitalize the Wendy’s® brand, improve our bond with customers and generate sustainable same-stores growth is producing positive results,” says Chief Executive Officer and President Kerrii Anderson. ”We’ve delivered 12 consecutive months of positive same-store sales through May, but the last two months have been challenging as we’ve aggressively adjusted pricing to bring Wendy’s more in line with the market. We believe our new market-based pricing approach is the right long-term strategy to generate more positive store operating margins, but it has pressured transactions in the short-term. Our employees and operators are producing improved results, but certain external factors have changed and are impacting results.
“Our goal is to keep everyone in the system focused on executing our strategic plan to drive profitable sales and expanded margins at every restaurant,” Anderson continues. “Our brand strategy and new advertising will clearly tell consumers about Wendy’s superior quality and great-tasting products. We have been emphasizing our “fresh, never frozen beef” in our newest ads. At the same time, we are focused on operational improvements across the system and we expect to meet our store labor savings and G&A goals.”