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Published: Monday, 6/13/2011

Wendy's/Arby's says it will sell most of its Arby's business for $130M to private equity group

ASSOCIATED PRESS
The most of the Arby's portion of the business will be sold for $130 million to a private equity group. The most of the Arby's portion of the business will be sold for $130 million to a private equity group.
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ATLANTA  — The marriage of square burgers and roast beef sandwiches is about to end.

Wendy’s/Arby’s Group said Monday that it will sell a majority stake in its struggling Arby’s brand to a group led by Roark Capital Group, the Atlanta private equity firm. The move marks the end of a short-lived union between the two fast-food chains, and represents a role reversal. Arby’s started as the suitor in the relationship, and ended up on the chopping block.

The announcement comes less than five months after Wendy’s/Arby’s Group, which is also based in Atlanta, said it was putting Arby’s up for sale. Last month, CEO Roland Smith told analysts that he had seen “several quality bidders” for Arby’s, and that they had all done “significant due diligence.”

Roark will pay $130 million in cash for an 81.5 percent stake in Arby’s, and will also assume $190 million worth of Arby’s debt. Roark already owns Moe’s Southwest Grill, Cinnabon, and other restaurants.

Wendy’s/Arby’s Group will keep an 18.5 percent stake in Arby’s, and will change its name after the deal goes through. Spokesman Bob Bertini said the company is considering different options, and the new name will include the word “Wendy’s.”

Wendy’s/Arby’s Group values the minority stake it gets in Arby’s at $30 million will also get a tax benefit worth $80 million, which Bertini described as an “offset to taxable income.”

Wendy’s/Arby’s Group shares rose 31 cents, or 6.9 percent, to $4.83 in pre-market trading.

Wendy’s and Arby’s first came together when billionaire investor Nelson Peltz and his Triarc hedge fund, which already owned Arby’s, agreed to scoop up Wendy’s as well. Peltz remains involved as the company’s chairman.

Wendy’s/Arby’s Group has struggled since its formation in late 2008, the depths of the recession, losing money for seven of its 10 quarters. CEO Smith has said that selling Arby’s will allow the company to focus on Wendy’s, which he hopes to expand by launching breakfast in more locations and by opening more restaurants overseas.

Wendy’s has about twice as many restaurants — 6,500 to Arby’s 3,600 — and represents about 70 percent of the company’s revenue. However, in the first quarter, Arby’s seemed like the stronger player by some measures. Its revenue rose by 5 percent, while Wendy’s revenue fell less than 1 percent, though some of Arby’s performance was likely due to sale prices.

The sale is expected to close in the third quarter, which starts in July. Roark managing partner Neal Aronson said in a statement that Roark looks forward to helping Arby’s “great brand achieve its full potential.”



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