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New York (CNN Business)Last week, activist investor Nelson Peltz said in a regulatory filing that Trian Partners, his investment business firm and Wendy'due south top shareholder, is exploring a takeover of the burger chain.

The wealthy investor has a reputation on Wall Street as a corporate raider, pushing companies to brand drastic changes, such as restructuring, spinning off businesses or pursuing a merger or acquisition, in order to provide better value to investors.

Peltz has been successful in his often aggressive efforts. He is able to drive "very positive change within companies, at least from a shareholder value perspective," Emilie Feldman, management professor at Wharton business concern school, told CNN Business.

Activist investors like Peltz tend to step in when they think a visitor is undervalued, Feldman added. From their perspective, "the company could be worth more, if sure changes were made," she said.

These investors are typically looking to achieve i of three things: Changes in management, operational improvements or adjustments to the scope of a business concern, like getting rid of brands or moving into a new strategic space, Feldman said.

Peltz has already made major changes at Wendy'southward. Now, with the make struggling, he's looking to exercise so again.

What's going on at Wendy's?

In the get-go quarter, global sales at Wendy'southward restaurants open at to the lowest degree 15 months grew 2.4%.

Only first-quarter sales growth was much stronger for Wendy's competitors. McDonald'due south reported that sales at its global restaurants open at least 13 months jumped 11.8% while Burger King sales at locations open at least a year grew x.3%.

During a recent analyst call, Wendy'southward executives said the first-quarter results did not quite meet expectations.

"The first quarter, from a margin point of view, did not fully go with plan," said Wendy's CFO Gunther Plosch during a May analyst call. "We missed sales slightly," he said, adding that "commodity and labor aggrandizement was a little bit college than what we expected." Wendy's as well said that bad conditions had a negative affect on the quarter.

And so in that location's the fact that breakfast, which was helping Wendy's drive growth early on in the pandemic, isn't what used to be.

The chain launched its breakfast menu in early on March 2020, just before Covid upended American's lives. With Wendy'due south marketing push fresh in consumers' minds, sales of the meal surged, even as morning routines shifted dramatically. Competitors, on the other hand, saw breakfast sales dry out up.

But now, two years into the pandemic, breakfast hasn't been plenty to heave Wendy'southward numbers significantly.

"The breakfast surround was no doubt challenged across the industry ... impacting our full year breakfast sales growth expectations," said CEO Todd Penegor during the May analyst call. All the same, "we delivered solid results at the breakfast daypart," Penegor added, and Wendy's increased its share in that mealtime compared to other fast-food burger restaurants, he said.

The visitor's kickoff-quarter results missed Wall Street's expectations, sending the stock down when Wendy's reported on May xi, prompting some analysts to cut their target prices.

Wendy'southward was scheduled to have its investor mean solar day on June ix, but has postponed the conference to an unspecified engagement, the company said final week, adding that it is reiterating its 2022 outlook.

"As evidenced by our sales momentum, which accelerated on a two-year basis in Q1 2022, we continue to brand pregnant progress across our 3 long-term growth pillars: edifice our breakfast daypart, accelerating our digital business, and expanding our footprint beyond the globe," Penegor said in a statement.

"Our strong momentum, sound execution of our strategic initiatives and improvement in Company-operated eating place margin as nosotros exited the first quarter give us the confidence to reaffirm this total year 2022 outlook," he added. Wendy's declined to comment for this story beyond what it has stated publicly.

If Peltz succeeds in making large changes at the burger chain, it won't be the first fourth dimension.

Peltz's activist history

For Wendy's, which opened in 1969, things started to sour afterwards the 2002 death of founder Dave Thomas, according to a 2008 New York Times commodity.

"Wendy'southward struggled to notice management since its founder and spokesman, David 'Dave' Thomas, died," the report said. In the years after Thomas' death, a number of investors were pushing for change.

"Large shareholders were urging direction in private to do something nearly the visitor'due south fading image and poor marketing strategy," the Times reported. "Same-store sales — a key performance measure for the retail manufacture — were in steady turn down, equally was its stock price."

Peltz was one of these investors. He began agitating for change in late December 2005, eventually becoming chairman of the lath.

Over the years, nether continued shareholder pressure, Wendy's business has changed, including the spin off Tim Horton's and afterward Arby's.

It's not clear exactly what volition happen next. Just investors are taking Peltz seriously. In the filing, Peltz said that to better shareholder value, Trian is considering a merger or acquisition, amid other options. Wendy's (WEN) stock jumped on that news last week.

"The Board will carefully review whatever proposal submitted by Trian Partners," Wendy'southward said in a statement post-obit the Trian filing, adding, "we remain focused on achieving our vision of becoming the world's almost thriving and beloved restaurant make."

To experts, Peltz's involvement is far from shocking. In a annotation last week, Wedbush analyst Nick Setyan said that "we are unsurprised by Peltz' appetite," adding that Trian is "no longer sitting on the sidelines."

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Source: https://www.cnn.com/2022/06/02/business/wendys-activist-investor/index.html

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