‘The board has taken the poison pill’: Wendy’s rejects $1.4B offer from billionaire Nelson Peltz as fast-food chain fights takeover

As Reuters reported, Peltz’s investor group also included restaurant operator Flynn Group and investment companies Sixth Street Partners and BlueFive Capital.

“The proposal substantially undervalues the company,” a special committee of independent Wendy’s board members said in a statement, adding that it “is not in the best interests of Wendy’s and its shareholders.”

But Peltz is hardly an outsider. According to Reuters, regulatory filings show that he and related parties already own 16.3% of Wendy’s, giving them significant influence over the company. Their $7.35-per-share offer represented a 20% premium when it was announced in late October, though Wendy’s stock has since climbed above that price.

The takeover attempt follows years of disappointing returns for Wendy’s shareholders. The stock has lost more than 60% of its value over the past five years, falling from more than $20 to around $8.40, according to Yahoo Finance data.

The company’s operating performance has continued to deteriorate. Wendy’s withdrew its annual forecast and slashed its dividend earlier this year as U.S. same-store sales fell 7% in the second quarter. International same-store sales declined 2.3%.

The weakness continued into the third quarter, when U.S. same-store sales fell 5.7% year over year. As part of its restructuring, Wendy’s signed a letter of intent to acquire up to 163 restaurants from franchise operator Meritage Hospitality Group.

How Wendy’s poison pill could thwart Peltz’s takeover

A poison pill is a takeover defense that gives existing shareholders, excluding the potential buyer, the right to purchase additional shares at a steep discount if an activist investor crosses a specified ownership threshold.

Under Wendy’s shareholder rights plan, filed with the Securities and Exchange Commission (SEC) in early November, an investor who acquires 15% or more of the company’s shares without board approval could trigger the poison pill defense. By allowing other shareholders to buy discounted shares, the company can dilute the acquirer’s stake, forcing them to spend more money to regain the same ownership percentage.

Peltz and his partners already own 16.3% of Wendy’s, but their existing stake is exempt. Buying additional shares without approval could trigger the poison pill.

According to the SEC filing, the plan expires on Nov. 3, 2027, unless Wendy’s terminates it earlier.

“Now that the board has taken the Poison Pill, Peltz and Trian will need to decide if they want to sweeten the offer,” Zacks stock strategist Andrew Rocco told Reuters.

Alternatively, Peltz could seek more board seats through a proxy fight or support CEO Bob Wright’s turnaround plan, Rocco said.

Wendy’s is losing ground in the fast-food wars

In August, Wendy’s reported a net loss of 245 U.S. locations in the first half of the year. The company is also dealing with the bankruptcy of franchise operator Meritage Hospitality Group, which helps explain its earlier decision to acquire up to 163 of Meritage’s restaurants. The company expects to sell and transfer the remaining locations to other franchisees through the bankruptcy process.