Wendy’s Could Be Up for Sale!
Posted on June 21, 2007 | By Enkay | Leave a Comment | 682 Views
Some of you may LOVE Wendy’s but it might come as a surprise to some of you that Wendy’s hasn’t been doing so well financially. On Monday, Wendy’s slashed its earnings forecast down and is now considering a sale among other alternatives. In April, the company contemplated a sale as an option and this past Monday, that option has become an option that they are likely to take. Wendy’s is the Number 3 hamburger gain and it cut its earnings forecast down about 9-13% per share. Wendy’s even tried adjusting prices to align itself with McDonalds and Burger King meaning that in some areas a baked potato would now cost $1.19 instead of the original .99 cents. It also was nudged to spin off a coffee and doughnut chain but apparently that plan didn’t fall through. One of Wendy’s largest owners, Highfields Capital Management, which owns 8.5% of Wendy’s was pushing for a sale to the highest bidder. Highfields Capital is a private investment manager firm. Wendy’s currently owns about 22% of its 9,900 stores and the other 78% are franchisee owned. A private equity buyer could might as well get something out of purchasing the firm by re-capitalizing the debt, re-franchising some of the company-owned restaurants and by indulging in better marketing strategies. Well, it would be interesting to see how this turns out for Wendy’s. In the mean time, lets have a look at its stock chart.
Stock Chart
Enlarged ViewAs you can see above, I have the entire stock chart showing the dividends in blue and the stock splits in orange. The chart above represents a time scale from 1983 to 2007 (current). If you notice, the stock splits came early and so it doesn’t make this too much fun as a buyer. All the dividends after 1987 were around the 6 cent mark.
Hypothetical Scenario for Fun
For example, if you purchased Wendy’s stock in the Feb of 1990 at $4 per share and you purchased 1000 of them for a total cost to you of $4000. Over the years you let it hang around and decided to sell around July 2006. So lets break this down.
Purchased: 1000 shares at $4 each for a cost of $4000
Sold: 1000 shares at $60 each for a sale price of $60,000
Thats a profit of $56,000 and that may not seem like much considering you waited 16 years but think about this in the case that you owned 10,000 shares then you will see a big change. If there were stock splits then you would see your profits rise instantly and thats what I meant that its not “too much fun as a buyer”
Interesting Facts That You May Not Have Known
1) The Total Market Capitalization for Wendy’s is $3.38 Billion
2) Outback Steakhouse was taken private this month for $3.5 Billion
3) Applebee’s is exploring a sale and reports were made that IHOP may have bid.
Well, I hope you enjoyed this post. I finally got to talk about a little bit of finance on my blog and I hope you appreciate my insight! I wonder if you guys actually like Wendy’s when compared to McDonalds or BurgerKing.
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