Wendy's and Arby's Break Up - Analyst Blog
2011年6月15日 - 8:25PM
Zacks
Wendy’s/Arby’s Group Inc. (WEN) recently sold
Arby’s to Atlanta-based private equity firm Roark Capital Group for
$430 million. Post-split, Wendy’s/Arby’s Group will receive
approximately $130 million in cash and retain an ownership interest
in the Arby’s business of 18.5%, which translates to approximately
$30 million.
The buyer will assume approximately $190 million of
Arby’s-related debt, consisting primarily of capital lease and
sale-leaseback obligations. The rest of the amount will come to
Wendy’s/Arby’s Group in the form of an income tax benefit, which it
will realize over the next few years. The deal is expected to close
early in the third quarter of 2011. The Group will report Arby’s as
a discontinued operation in its second quarter results.
In January, Wendy’s/Arby’s Group planned to sell its Arby’s
restaurants to focus on strengthening the Wendy’s brand. UBS
Investment Bank, an arm of UBS AG (UBS) was the
Group’s financial advisor for the divestiture process.
Wendy’s/Arby’s had shaped up back in 2008 with the merger of
Triarc, the franchisor of Arby’s restaurant chain, and Wendy’s, the
owner-operator-franchisor of the eponymous fast food chain.
Arby’s new family, Roark Capital Group, has a proven track
record of being an investor and value-added partner with expertise
in franchise and restaurant sectors. Its present
franchise/multi-unit portfolio includes companies like Auntie
Anne’s, Batteries Plus, Carvel Ice Cream, Cinnabon, Corner Bakery,
Fast Signs, Il Fornaio and McAlister’s Deli.
Despite a portfolio of 3,631 restaurants, Arby’s had failed to
perform during the U.S. economic downturn largely due to its lack
of international exposure. Nevertheless, signs of stabilization at
Arby’s with its North America company-operated and franchised
same-store sales increasing a respective 6.8% and 4.8% during the
first quarter of 2011 should be encouraging for Roark Capital.
Wendy’s/Arby’s Group, on the other hand, sees higher growth
opportunities from Wendy’s that has 6,565 restaurants in more than
20 countries. The company is also exercising initiatives like value
menu offerings, remodeling, introduction of new dayparts and
setting up of new units globally to drive traffic and improve
same-store sales at Wendy’s. The divesture will help Wendy’s to
further increase its earnings and deleverage its balance sheet.
Wendy’s is not the only fast food chain looking to vend slower
growth brands. Yum! Brands Inc. (YUM) is also
planning to sell its slow moving Long John Silver’s and A&W
brands to concentrate more on its star performers like KFC, Pizza
Hut and Taco Bell.
In recent past, sell-offs and acquisitions gained momentum in
restaurant industry as these are a long-term strategy to strengthen
financial flexibility. Big names like Burger King Holdings and
California Pizza Kitchen Inc. (CPKI) have also
walked this path.
Last year, Burger King was acquired by a private investment firm
3G Capital for $4 billion. Last month, California Pizza Kitchen
also agreed to come under the wings of Golden Gate Capital for
approximately $470 million or $18.50 per share in cash. The deal is
yet to close.
Wendy’s/Arby’s Group currently retains a Zacks #3 Rank
(short-term Hold rating). We are also maintaining our long-term
Neutral recommendation on the stock.
CALIF PIZZA KIT (CPKI): Free Stock Analysis Report
UBS AG (UBS): Free Stock Analysis Report
WENDYS/ARBYS GP (WEN): Free Stock Analysis Report
YUM! BRANDS INC (YUM): Free Stock Analysis Report
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California Pizza Kitchen (NASDAQ:CPKI)
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