April 26, 2007
The Other Shoe Drops on Wendy's
Wendy's is looking for a buyer. The final act is about to open on the two year interest in Wendy's by several prominent hedge funds. In the opening acts the hedge funds bought Wendy's stagnant shares, demanded that the board spin off two profitable subsidiaries (which it did), eased out the CEO, and negotiated for three seats on the board of directors. In response, Wendy's management took advantage of a rising stock price to cash in some options and received a standstill agreement from the most prominent of the hedge fund operators (Peltz). The standstill is expiring. Peltz is still interested and the board is rumored to be considering putting the company up for sale. The entire drama unfolded in a company with a staggered board and the multiple anti-takeover protections in Ohio legislation. The lesson? The old anti-takeover protections no longer work against determined hedge funds. The threat to mount a proxy fight against for even one-third of the seats works if those seats include insider heavyweights up for re-election (the CEO or the CFO).
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