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Wendy’s Gets Wings on Talks of Potential Buyout

Story Highlights

Following the news that its largest shareholder is putting together a deal for the remaining stake in the company, Wendy’s stock is rallying.

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Shares of Wendy’s Co. (WEN) rallied a solid 14.5% in Tuesday’s extended trading session and a further 12.2% at the time of writing after the company’s largest shareholder, Trian Fund Management LP, said it was looking for a potential deal to buy the remaining stakes in the company.

In a securities filing, the activist hedge fund said, “It intends to explore and evaluate the possibility of the Filing Persons’ participating, alone or with third parties, in a potential transaction with respect to the Company to enhance shareholder value.”

It said that the transaction could “include an acquisition or a business combination such as a merger, consolidation or a tender offer.”

Further, Trian has appointed financial, legal and/or other advisors for discussing the potential options.

The Co-Founder of Trian and Chairman of Wendy’s board, Nelson Peltz, controls about 19.4% of Wendy’s stock through his private equity fund, Trian, and other affiliates.

The announcement comes at a time when Wendy’s is struggling with rising costs due to inflationary pressure and supply-chain issues.

On May 11, 2022, Wendy’s reported its first-quarter results. Adjusted earnings dropped 15% year-over-year, due to higher commodity and labor costs, lower customer demand and investments made to expand operations into the United Kingdom.

Stock Rating

Last week, Loop Capital Markets analyst Alton Stump maintained a Buy rating on Wendy’s with a price target of $26 (implying 59.8% upside potential from current levels).

Based on 11 Buys, 10 Holds and one Sell rating, the stock has a Moderate Buy consensus rating. Wendy’s average price forecast of $22.79 implies 40.1% upside potential from current levels.

Bloggers’ Take

TipRanks data shows that financial bloggers are 90% Bullish on WEN, compared to a sector average of 66%.

Conclusion

The market has welcomed the news of Wendy’s takeover with open arms. This is because the company struggles with rising costs and a contracting customer base.

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