An SEC Filing this morning shows activists are going to go after Wendy’s International Inc. (NYSE: WEN) with a little more publicity than mere private letters.  Trian Fund Management, L.P., Triarc Companies, Inc. (NYSE: TRY) Peter May, Nelson Peltz, Thomas Sandell, and others are in an activist group that have sent a letter to Wendy’s International, Inc. (NYSE: WEN).

Trian appears to be the lead in the group as far as signing the letter, and the letter says it is very concerned about the current direction of Wendy’s. Trian and Triarc were informed that the Wendy’s special committee had rejected two acquisition proposals made by Trian and Triarc, which had called for the combination of Wendy’s and Arby’s and the other involved an acquisition of 100% of Wendy’s for over $900 million in cash with the balance in stock.

These proposals would have required the approval of the shareholders on each side of the transaction and neither of the proposals was conditioned on the receipt of third party financing. The letter notes that the most recent proposals were summarily rejected in less than 24 hours.

Before any transaction is considered, shareholders should be fully updated on the current financial condition of the company, including sales, profits and margins. The activist group also expects that the company will not take any action prior to the earnings announcement on April 25.

Trian wants shareholders to determine the future of Wendy’s and it intends to contact other shareholders to call a special meeting to give shareholders the opportunity to vote on the future direction of Wendy’s.

This is looking like it is a very unique special situation.  The problem is that the value has been previously hard to see in Wendy’s and it would not have been exactly cheap for an acquirer.  But this pullback down to the mid-$20’s may actually change this now that its ratios have come in-line or under many of the peers. 

We checked Capital IQ’s database and the company isn’t an easy one to push around, although it isn’t exactly one that can lock the doors and pray for the best while the world burns.  It requires a 67% vote by the board to approve any transaction, and 75% of shareholders are need to approve any transaction without board approval.  The board is considered a classified board, and it does have cumulative voting for board seats.  Its 15 member board also has 3-year terms.  The provisions do allow for shareholders to act by written consent, so this letter at least has to be acknowledged. Capital IQ also notes that Wendy’s does have an active poison pill.  Lastly, Ohio is that the state of incorporation, and that state is one of the harder ones for hostile mergers or actions against public companies incorporated there.

You can join our open email distribution list to hear about other activist situations, IPO’s, back door plays into IPO’s, spin-offs. break-ups, and other special situations we frequently preview.  We have reviewed this one in months past for the Special Situations newsletter, but the valuations at the time appeared to be a serious obstacle.  Now that it has come in, it looks like it may be time to dust off those notes and see if the relative value is there.

Wendy’s shares were basically unchanged pre-market after closing at $25.10 yesterday, but shares are now up almost 1% at $25.34 right after the open.  The 52-week trading range is $22.18 to $42.22.  Its current market cap is just shy of $2.2 Billion.

Jon C. Ogg
April 18, 2008

Jon Ogg is a producer and editor of the Special Situation newsletter and the "10 Stocks Under $10" weekly newsletter for a673b.bigscoots-temp.com.

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