Triarc Cos (NYSE:TRY) . (TRY) won a prolonged bidding war for Wendy's International Inc. (NYSE:WEN) ( WEN) with a last-minute sweetener that changed the minds of a special committee evaluating the hamburger chain's future, a document filed with the Securities and Exchange Commission Monday disclosed.
While Triarc, controlled by billionaire Nelson Peltz, had long coveted Wendy's (NYSE:WEN) and sought to merge it with its Arby's roast-beef sandwich fast-food chain, it encountered a determined rival as negotiations occurred over several months.
That rival, identified only as Bidder A in the registration statement that Triarc filed, seemingly had won over a special committee of Wendy's (NYSE:WEN) board weighing various alternatives. Indeed, the committee had recommended to Wendy's (NYSE:WEN) board that Bidder A's bid be accepted.
But four days later, this past April 23, it changed its mind when Triarc sweetened its proposed exchange rate of Triarc for Wendy's (NYSE:WEN) shares to 4.25:1.
Early on, Triarc had proposed a merger valued at $32-$36 per Wendy's (NYSE:WEN) common share, comprising $20-$25 cash and the remainder in Triarc Class B shares. In early April that was modified to an exchange of 3.2 Triarc shares for one of Wendy's (NYSE:WEN) .
Two other bidders dropped out along the way, partly because of the tightening credit markets and difficulty in obtaining financing for a deal on favorable terms.
Initially Bidder A had indicated making a bid valued at between $36 and $40 a share. By mid-November of last year that had been revised to a recapitalization valued at $29 a share, including a $26.50 special cash dividend to Wendy's (NYSE:WEN) holders and $2.50 in retained Wendy's (NYSE:WEN) common shares. That proposal was conditioned on bridge financing from Wendy's (NYSE:WEN) financing sources and of sale- leaseback financing. But the special committee rejected those terms, partly because credit-market conditions were making Bidder A's financing assumptions unrealistic.
Besides a leveraged recapitalization, a subsequent proposal called for, among other things, Wendy's (NYSE:WEN) purchase of Bidder A's designated chief executive officer's franchise business for $165 million, and a special dividend valued at $12.70 a share.
Wendy's (NYSE:WEN) special committee representatives delivered a counterproposal to Bidder A. Late in the negotiations, Bidder A confirmed that it would derive a 6% return on its investment before Wendy's (NYSE:WEN) common shareholders would realize a return.
After further negotiations, the special committee decided that Bidder A's proposal was superior and on April 19 recommended it to Wendy's (NYSE:WEN) board.
The next day Triarc sweetened its offer, to $28.50 in the form of a 4.0-4.1 shares of Triarc for each Wendy's (NYSE:WEN) share. Further talks ensued, as the deadline for a scheduled Wendy's (NYSE:WEN) board meeting approached.
Finally, on the morning of April 23, Triarc again sweetened its offer to the 4.25-share exchange rate that eventually prevailed, after Bidder A said it would not improve its proposal. Later that day Wendy's (NYSE:WEN) board agreed to accept Triarc's offer, concluding it was in the best interests of shareholders.
The prospectus also reveals concern among committee members that the drawn-out process of weighing the company's future was creating strain on Wendy's (NYSE:WEN) management team and "undermining focus on normal business operations."
The SEC filing also disclosed that at one point the special committee's chairman interviewed unnamed individuals as a possible replacement for Wendy's (NYSE:WEN) chief executive, Kerrii Anderson. That inquiry was dropped as negotiations between Triarc and Bidder A intensified.
Under Triarc's takeover plan, Anderson would be replaced by Roland Smith, Triarc's CEO.
Shares of Wendy's (NYSE:WEN) were trading recently at $28.68, down 98 cents, or 3.3%, on the New York Stock Exchange. Those of Triarc were trading at $6.82, down 53 cents, or 7.2%.
-By Richard Gibson; Dow Jones Newswires; 515-282-6830; dick.gibson@ dowjones.com
(END) Dow Jones Newswires 06-02-08 1233 Copyright (c) 2008 Dow Jones & Company, Inc.
