March 3 (Bloomberg) -- Shares of Wendy's International Inc. had the biggest gain in almost three months after the company bowed to pressure from shareholder activist Nelson Peltz and said it will add three board members nominated by him and may sell the Baja Fresh restaurant group.

The third-largest U.S. hamburger chain also agreed to spin off the Tim Hortons doughnut shops by Dec. 31 and adopt measures to boost profit at Wendy's restaurants. The directors will expand Wendy's board to 15 members from 12. Wendy's and Peltz's Trian Fund Partners Inc. announced the agreement last night in a statement. Peltz is also seeking seats on H.J. Heinz Co.'s board.

The changes are a triumph for Peltz, who bought a 5.5 percent stake in Wendy's and urged the company to cut costs and sell assets, saying a management plan to boost the stock price didn't go far enough. Under the accord reached yesterday, Peltz agreed to abandon a proxy fight and got Wendy's Chief Executive Officer Jack Schuessler to commit to further share repurchases.

``Wendy's has become a `Pandora's Box' of shareholder value,'' Prudential Equity Group analyst Larry Miller said in a report today in which he raised his rating to ``neutral'' from ``underweight.'' The changes ``could ultimately result in deeper and quicker cost cuts at the core-Wendy's brand. It also may increase the likelihood that Triarc eventually buys Wendy's.''

Ackman's Push

Shares of Dublin, Ohio-based Wendy's rose $1.36, or 2.3 percent, to $59.80 at 9:45 a.m. in New York Stock Exchange composite trading. The stock has soared 54 percent in the past year in part on investor optimism that Wendy's would adopt Peltz's plans.

``We are excited that the new directors will work with the board to further enhance shareholder value at Wendy's,'' Peltz said in the statement. ``We are now highly supportive of Wendy's management team and their initiatives, and we believe that these new board members will contribute to Wendy's plan to improve its profitability.''

Heinz, the world's largest ketchup maker, said today Peltz wants to nominate five directors to the board.

Triarc spokeswoman Ann Tarbell didn't immediately return a voice mail message today.

Peltz is the second activist investor to win changes at a fast-food chain in the past year. Hedge-fund manager Bill Ackman pushed McDonald's Corp. the world's largest hamburger chain, to sell company-owned restaurants after his Pershing Square Management LP bought a 4.9 percent stake in the company.

Tim Hortons

Last year, Ackman took on Wendy's and demanded the company sell a stake in Tim Hortons, which has 70 percent of the coffee market in Canada, to boost shareholder value.

In July, under pressure from Ackman, Wendy's agreed to sell as much as 18 percent of Tim Hortons in an initial public offering, buy back an additional $1 billion in shares and raise the dividend by 25 percent. The company also said it would sell real estate.

``It is great to see management and shareholders working together to create value,'' Ackman said in an e-mailed statement. ``We congratulate Trian and Wendy's management on their agreement and look forward to the company and its shareholders reaping the benefits.''

Peltz has said Wendy's should cut costs by $200 million and sell the Baja Fresh, Café Express and Pasta Pomodoro brands. The plan could boost Wendy's stock to $89 a share, including $45.45 for the Wendy's brand and $32.32 for Tim Hortons, Peltz has said.

Peltz, 63, is chairman and chief executive of New York- based Triarc Cos., which buys stakes in companies and seeks to improve their operations. Triarc owns Arby's fast-food restaurants, which is known for its roast beef sandwiches and has 3,500 stores.

New Directors

Triarc's investments have also included Snapple Beverage Corp., which it bought from Quaker Oats Co. for $300 million.

Peltz has been seeking investors to help him purchase a large stake in H.J. Heinz Co., the food company that is divesting $1 billion of businesses, and he may challenge the board of directors for control of the company, financial news network CNBC reported last month, without saying where it got the information.

The new Wendy's directors include Jerry W. Levin, who as a former Pillsbury Co. executive ran food chains including Burger King, Godfather's Pizza and Bennigan's. Levin is also former chairman of Revlon Inc. and now runs an investment firm.

Wendy's Results

Peter H. Rothschild, a managing member of Daroth Capital LLC and Stuart I. Oran, a managing member of Roxbury Capital Group LLC, were also added to the board.

Schuessler said yesterday that he will also seek to turn around Wendy's. ``We are focused on growing revenues and improving profitability at the core Wendy's brand,'' he said in a statement.

Wendy's has been hurt by competition from McDonald's, which has added premium-chicken sandwiches and salads to its menu and also extended hours at 4,000 of its 13,700 U.S. restaurants. Wendy's has also stumbled with its advertising and a move away from its value menu.

Comparable-store sales at Wendy's stores dropped for the first time in 18 years in the last year. The restaurants lost customers when a woman claimed she found a finger in a bowl of chili. The woman and her husband were later sentenced to prison terms after they entered guilty pleas to charges of conspiracy and grand theft in connection with the incident.

Baja Fresh

Wendy's wrote down the value of Baja Fresh. It bought the chain for $275 million in 2002.

Baja Fresh's same-store sales fell 3.7 percent last year and declined 6.3 percent in 2004. Wendy's operated 299 Baja Fresh stores as of Jan. 1.

The division that includes Baja Fresh had a fourth-quarter operating loss of $15 million, which narrowed from a $29.3 million loss a year earlier. The unit's revenue fell 11 percent to $46.8 million.

Tim Hortons may raise as much as $667 million selling shares in an IPO. It plans to sell as many as 29 million shares at $18 to $20 each, according to an SEC filing by the Oakville, Ontario-based company.

To contact the reporters on this story: Josh Fineman in New York at jfineman@bloomberg.net; Danny King in San Francisco at dking19@bloomberg.net.

Last Updated: March 3, 2006 10:04 EST