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Wendy's/Arby's Group considering Arby's sale

January 20, 2011

Wendy's/Arby's Group Inc. is considering selling its struggling Arby's business and concentrating more on its expansive Wendy's hamburger chain. Its shares rose more than 9 percent in pre-market trading.

The Atlanta restaurant operator has experienced softness at both its Wendy's and Arby's locations, but Arby's has long been suffering because its sandwiches can cost $5 or more, more expensive than many other fast-food offerings.

Diners have focused on value and price in the economic downturn, seeking cheaper alternatives.

While Wendy's/Arby's announced in November that Arby's would be coming out with lower-priced options, the company has now decided to pursue strategic options and potentially shed the operations. UBS Investment Bank will help Wendy's/Arby's as it explores alternatives for Arby's.

The Arby's sandwich chain has almost 3,700 restaurants and is known for its roast beef sandwiches. The restaurants also serve deli-style sandwiches, toasted subs, salads and other items.

Chairman Nelson Peltz said in a statement on Thursday that the company believes the best way to maximize shareholder value is to concentrate its efforts on Wendy's.

He says the reality is that the Wendy's brand, given its relative size and scope, is the key drive of shareholder return.

Peltz's Trian Fund Management owns about one-fourth of Wendy's/Arby's stock.

Wendy's currently has more than 6,500 restaurants in more than 20 countries. Wendy's/Arby's has more than 10,000 restaurants in the U.S. and 24 countries and U.S. territories worldwide when accounting for both its Wendy's and Arby's locations.

The announcement of the possible Arby's sale comes just two days after Yum Brands Inc. said it was putting its Long John Silver's and A&W restaurant chains up for sale so it could focus on its growing international business. A sale of those two businesses would leave Yum with Taco Bell, Pizza Hut and KFC in the U.S. and abroad.

The Arby's news also comes during ongoing speculation that Wendy's/Arby's is a potential takeover target. The company said it received a third-party inquiry in June about acquiring the fast-food company. In November management pushed for Peltz's Trian to act on the inquiry "as promptly as practicable."

Wendy's/Arby's lost money in its third quarter, hurt by higher ingredient costs and weakness at Wendy's and Arby's locations. The company plans to report preliminary fourth-quarter and full-year results on after the market closes on Jan. 26.

Its shares rose 42 cents, or 9.4 percent, to $4.89 in trading before Thursday's market opening.

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