April 24 (Bloomberg) -- Billionaire Nelson Peltz's Triarc Cos. agreed to buy Wendy's International Inc. for about $2.4 billion to combine the third-biggest U.S. hamburger chain with his Arby's roast beef restaurants.

Wendy's jumped 4.6 percent in New York Stock Exchange composite trading after Triarc said it will offer 4.25 shares for each Wendy's share. That values the chain's Class A shares at about $26.78 each, 5.7 percent higher than yesterday's closing price.

Peltz, 65, pressured Wendy's for more than two years to sell itself, and he became the chain's largest shareholder as it lagged behind McDonald's Corp. and Burger King Holdings Inc. Wendy's has been seeking a buyer since April 2007. Peltz said in July he might be willing to pay $37 to $41 s share for Wendy's.

``Today's announcement is definitely a psychological disappointment, especially after the rather embarrassingly long one-year search,'' Cowen & Co. analyst Paul Westra wrote in a research note. ``The drawn-out uncertainty ultimately led to a fundamental deterioration of the Wendy's business.''

Triarc Chief Executive Officer Roland Smith, 53, will be CEO of the combined company as well as of the Wendy's brand. The company will have sales of about $12.5 billion and 10,000 restaurants. Triarc, based in Atlanta, is less than one-third the size of Wendy's on the New York Stock Exchange.

Wendy's gained $1.07 to $26.39 at 4:01 p.m. in New York Stock Exchange composite trading. Triarc Class A stock rose 17 cents to $6.47.

`The Goal'

``The goal is to improve the company store margins from where they are today to the level generally that their franchises are delivering on a regular basis,'' Smith said in a telephone interview.

Wendy's U.S. margins before interest, taxes, depreciation and amortization were 8.1 percent in the first quarter. Smith didn't specify franchisees' margins are.

The combination of the two chains may produce $100 million in additional operating earnings over time from reduced food, labor and operating expenses. Wendy's may save $60 million by cutting duplicate corporate functions.

``Ultimately there's a lot to be realized in synergies and improvement of Wendy's, which certainly has been under-earning for a number of years,'' said Michael Gallo, an analyst at CL King & Associates who advises investors to buy Triarc shares. ``Obviously it's going to take some time before all that settles in.''

Breakfast Menu

The company plans to grow by extending its breakfast menu to additional locations, and with international expansion, new store openings and acquisitions.

Smith, who started working in fast food at McDonald's Corp. when he was 16, sees expansion in international markets partly through co-branding of the Wendy's and Arby's in some restaurants, similar to what Yum! Brands Inc. does.

Dave Thomas opened the first Wendy's in 1969, naming the restaurant after his daughter, Melinda Lou, who was nicknamed Wendy. The company went public in 1976, raising $28 million, and by 1997 had opened its 5,000th restaurant.

Thomas began appearing in television ads in the late 1980s after Wendy's retired its ``Where's the Beef'' advertising campaign, a series of commercials that helped the chain narrow the gap with McDonald's and Burger King in the 1980s.

Thomas became the public face of Wendy's, playing the role of a self-effacing boss plugging the chain's hamburgers, French fries and milk shakes.

`I'm Cheap'

``Our strategy isn't to make me a hero, it's to tell people about our quality food, good service and clean restaurants,'' Thomas said in a 1996 Bloomberg interview. ``I don't know if I'm the best one to do it, but I'm cheap.''

Kerrii Anderson, Wendy's CEO since 2006, failed to keep up with new product introductions from McDonald's, which added snack wraps and premium coffee, and Burger King, which offered a discount breakfast menu.

Wendy's said today first-quarter profit dropped 72 percent to $4.14 million, or 5 cents a share, missing analysts' estimates. Revenue fell 1.4 percent to $582.2 million, the fourth consecutive quarter of lower or little-changed sales.

The average estimate of nine analysts surveyed by Bloomberg was for 17 cents.

Falling Sales

Wendy's reported earlier this month that sales at company- owned and franchises outlets dropped for the second quarter in a row.

``We are not satisfied with first-quarter results,'' Anderson said in the statement. ``We know we must do better and we are focused on driving sales and performance in future quarters.''

In February, Peltz threatened Wendy's with a proxy fight, saying he planned to nominate six candidates to Wendy's board. Last week he said Wendy's rejected an acquisition proposal and a separate offer to merge Wendy's with Arby's. Peltz's Trian Fund Management is Wendy's largest shareholder with a 9.8 percent stake.

In the past two years he pursued and won board seats at ketchup maker HJ Heinz Co. and Kraft Foods Inc. and helped force Cadbury Schweppes Plc to spinoff its soda unit. In December, he acquired more than 10 percent of Cheesecake Factory Inc.

Following the death of founder Thomas in January 2002, revenue at Wendy's has waned, with sales at older stores dropping six quarters in a row before Jack Schuessler resigned as chief executive officer in April 2006.

JPMorgan Chase & Co. and Greenhill & Co. advised Wendy's, on the takeover by Triarc, while Akin Gump Strauss Hauer & Feld LLP and Winston and Strawn were its legal advisers. Wachovia Securities Inc. and Merrill Lynch & Co. advised Triarc, with legal advice from Paul, Weiss, Rifkind, Wharton & Garrison LLP and Jones Day.

To contact the reporter on this story: Michael Nol in New York at mnol@bloomberg.net.

Last Updated: April 24, 2008 19:05 EDT