Dow Jones News -- Wendy's Plans IPO to Sell A Stake in Tim Hortons Unit ...........................
July 29, 2005
Wendy's Plans IPO to Sell A Stake in Tim Hortons Unit
DOW JONES NEWSWIRES
Wendy's International Inc. plans to sell 15% to 18% of its Tim Hortons coffee and doughnut chain and sell some Wendy's restaurants and real estate as part of a broad restructuring plan aimed at slowing growth in favor of improving returns.
Shares of Wendy's surged ahead of the market open Friday, hitting about $51 in pre-market trading, according to Inet, up 13% from Thursday's close of $45.27.
The Dublin, Ohio, operator and franchisor of fast-food restaurants said it plans to hold an initial public offering for the stake in Tim Hortons within the next nine months and use the proceeds to repurchase its own shares. Wendy's, which is the third biggest fast food chain in the U.S. behind McDonald's Corp. and Burger King, didn't indicate how much it expects to make from the IPO.
In addition, Wendy's plans to reduce the percentage of company-operated Wendy's restaurants to 15% to 18% from 22%, selling stores to franchisees, in an effort to improve operating margins. The company also plans to close 40 to 60 money-losing restaurants and sell 217 properties it leases to franchisees.
Wendy's anticipates the net impact of the actions on earnings to be neutral or slightly positive.
Wendy's also plans to slow new-store development in the U.S., citing rising real-estate and building costs. Starting in 2006, the company will open 30 to 40 new stores a year after opening, on average, 71 a year over the past four years. The company anticipates saving $50 million to $60 million a year in capital expenditures.
Wendy's currently has 5,935 Wendy's restaurants, with the company operating about 22%, or roughly 1,306. Based on its plan to reduce the percentage of company-operated stores to 15% to 18%, the company must dispose of 237 to 415 stores.
In Canada, Wendy's plans to close "certain underperforming units" and limit development to the most profitable areas. There are 384 Wendy's in Canada, 154 of them company-operated.
Wendy's said any charges associated with store closings will be offset by gains from the planned real-estate sales.
A day earlier, Wendy's said its second-quarter profit declined slightly from last year, weighed down by higher beef costs and continued fallout from a false claim by a woman who alleged she found a finger in her chili in March.
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