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Wendy’s Gains After Saying Arby’s Sale May Boost Profit

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March 3 (Bloomberg) -- Wendy’s/Arby’s Group Inc., the third-biggest U.S. hamburger chain, rose the most in 20 months after saying that a possible sale of the Arby’s brand would increase earnings and free cash flow.

Wendy’s/Arby’s advanced 36 cents, or 7.6 percent, to $5.10 at 4:02 p.m. in New York Stock Exchange composite trading, the biggest gain since June 2009. The shares have gained 10 percent this year.

The chain said in January that it was considering shedding Arby’s and had hired UBS Investment Bank to help in the process. A sale of Arby’s would cut debt to $860 million and reduce general and administrative expenses, executives at the Atlanta-based company said today on a conference call.

Arby’s may fetch $600 million, or 6 times earnings before interest, taxes, depreciation and amortization, Larry Miller, an analyst with RBC Capital Markets in Atlanta, said in January.

Wendy’s/Arby’s loss narrowed to $10.8 million, or 3 cents a share, in the fourth quarter ended Jan. 2, from a loss of $13.6 million, or 3 cents, a year earlier, according to a statement today, reiterating preliminary results reported in January. Revenue declined 6.7 percent to $840.7 million.

Long-term debt rose to $1.57 billion as of Jan. 2 from $1.52 billion a year earlier, the company said.

The decision to explore a sale of Arby’s marked a reversal for billionaire Nelson Peltz, who is chairman and pushed to unite the restaurant brands in 2008. Peltz’s Trian Fund Management LP was the company’s largest shareholder as of Feb. 2, according to Bloomberg data.

Wendy’s/Arby’s trails McDonald’s Corp. and Yum! Brands Inc. in sales in the fast-food industry.

Separately today, discount retailer Family Dollar Stores Inc. rejected a hostile takeover offer from Trian, saying it “substantially” undervalues its business, and adopted a defense to discourage unsolicited offers.

To contact the reporters on this story: James Callan in New York at jcallan2@bloomberg.net; Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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