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Wendy's may be put up for sale

The hamburger chain is under pressure from shareholders. Earnings are expected to fall short of expectations.

June 19, 2007|From the Associated Press

Wendy's International Inc. is exploring a possible sale of the company, the nation's third-largest hamburger chain said Monday as it warned that profit for the year would fall short of Wall Street's expectations.

"While a sale remains only one of the alternatives under consideration, we believe it merits more thorough examination," James V. Pickett, Wendy's chairman and head of a special committee doing the study, said in a statement.

The company, under pressure from shareholders, formed a committee in April to determine how to boost its stock price, including a possible sale. JP Morgan, as lead advisor, and Lehman Bros. Inc., as co-advisor, will conduct a review in conjunction with the committee.

A sale would cap a whirlwind year for the company, which has spun off its Tim Hortons coffee-and-doughnut chain, dumped its money-losing Baja Fresh Mexican Grill and laid off employees at its corporate offices.

The company said there was no assurance that a deal would be completed.

Billionaire investor Nelson Peltz's Trian Partners, which owns a big chunk of Wendy's stock, has pushed the company to make changes to boost its shares. Peltz captured three seats on the board in March 2006. Peltz's Triarc Cos. controls fast-food chain Arby's.

Wendy's said it expected to make $1.09 to $1.23 a share for the year, primarily because of weaker-than-expected sales at stores open at least a year, considered a key indicator of a retailer's strength, and higher-than-expected commodity costs.

Analysts surveyed by Thomson Financial expected earnings of $1.27 a share this year and $1.70 in 2008.

The company withdrew its earnings forecasts for 2008 and 2009.

Wendy's said same-store sales were up just 0.7% in the second quarter through Friday compared with 3.8% in the first quarter.

Kerrii Anderson, Wendy's chief executive and president, said sales in the last two months had been hurt because Wendy's had to raise prices.

"We believe our new market-based pricing approach is the right long-term strategy to generate more positive store operating margins, but it has pressured transactions in the short term," she said.

Wendy's shares fell $1.47, or 3.7%, to $38.26.

Dublin, Ohio-based Wendy's operates about 6,600 restaurants in the United States and abroad. It trails McDonald's Corp. and Burger King Holdings Inc. in the burger business.

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