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Wendy’s board of directors on Thursday unanimously rejected a $1.4 billion hostile takeover bid from a group of investment firms, saying the offer undervalues the restaurant chain and is not in the best interest of shareholders.
“The Independent Committee thoroughly evaluated this Proposal and unanimously concluded that it substantially undervalues Wendy’s standalone prospects and long-term earnings potential,” Art Winkleblack, chairman of the board, said in a statement, while also expressing confidence in CEO Bob Wright.
The takeover bid was led by asset management firm Trian Partners, founded by activist investor Nelson Peltz, along with Flynn Group LP, BlueFive Capital and Sixth Street Partners.
The groups are offering $7.35 per share for Wendy’s, whose stock traded at $7.75 before markets opened on Thursday. Wendy’s confirmed it received the unsolicited offer last month and said it would create an independent board to review the proposal.
Although it remains profitable, Wendy’s has faced slowing revenue growth in recent years, and its stock price has slumped nearly 14% over the last 12 months.
In its latest earnings report on Thursday, Wendy’s said that U.S. same-restaurant sales fell 5.7% in the third quarter, compared to the same time last year. The chain reported $547 million in revenue, down from $549.5 million in the year-ago quarter.
Wendy’s is losing traction with customers as inflation and rising beef costs force the burger chain to raise prices, the Associated Press reported last week.
The company has also struggled with operational issues, including staffing, employee training, handling drive-thru orders and marketing, Wright said during a call with Wall Street analysts in August. More broadly, he acknowledged that Wendy’s must improve the quality of its food to drive business.
“Wendy’s has always been known for quality, fresh, never frozen beef, hamburgers made to order, bacon cooked in our restaurants and fresh produce prepared daily,” he said. “But over time, we’ve drifted away from some of the standards that made Wendy’s distinctive. While we’ve maintained core practices in some areas, we’ve led cost and efficiency drive decisions that weaken that differentiation.”
Other businesses across the fast-food industry are also struggling as inflation weighs on customers’ wallets. McDonald’s reported on Wednesday that it would offer a new array of affordable options next year to boost sales.
