Wendy's announced the sale of 80% of its Arbys division yesterday for $180 million plus the assumption of $190 million in debt. Here's the Purchase and Sale Agreement. The transaction isn't structured as a merger, rather it's a stock purchase. Wendy’s/Arby’s Restaurants, LLC owns 100% of the shares of Arby’s Restaurant Group, Inc. It will sell 80% of those shares to Roark, a private equity buyer that is active in the restaurant space.
A couple of things about the agreement. First, there's a carve out for the Arby's Santa Monica location (pictured below). It's must be a good location, because Wendy's doesn't want to let it go:
Section 5.20. Santa Monica Restaurant. For a period of twelve (12) months following the Closing Date, Seller and its Affiliates shall have the right to negotiate the terms of a new or renewed lease or an assignment and amendment to the existing lease with the landlord for the Santa Monica Restaurant relating to, and seek all required zoning and other approvals, licenses, authorizations and permits and take all other reasonably necessary or advisable actions for, the conversion of the Santa Monica Restaurant from an “Arby’s” branded restaurant to a “Wendy’s” branded restaurant (the “Conversion”), and Buyer shall, and shall cause its Affiliates (including the Company Group) to, cooperate reasonably with Seller and its Affiliates in connection therewith. If, during the period of twelve (12) months following the Closing Date, Seller or any of its Affiliates (a) enters into an agreement or reaches an agreement in principle with the Santa Monica landlord for the Conversion and (b) obtains all required zoning and other approvals, licenses, authorizations and permits for the Conversion (as reasonably determined by Seller), then Buyer shall, and shall cause its Affiliates to, as promptly as practicable (and in any event within thirty (30) days) following receipt of a written demand therefor from Seller, without any consideration to be paid by Seller or any of its Affiliates to Buyer or any of its Affiliates (including the Company Group), (x) cease operating the Santa Monica Restaurant as an “Arby’s” branded restaurant and (y) transfer or cause to be transferred to Seller or its designated Affiliate (i) all of the interests to the Santa Monica Restaurant of Buyer and its Affiliates, free and clear of any Liens, and (ii) the note payable set forth under Section 3.7(b) of the Seller Disclosure Letter with the RTM number of 4100440. Until the earlier of (1) the date on which Buyer and its Affiliates cease to operate the Santa Monica Restaurant as an “Arby’s” branded restaurant pursuant to this Section 5.20 and (2) the date that is twelve (12) months following the Closing Date, Buyer shall, and shall cause its Affiliates (including the Company Group) to, use commercially reasonable efforts to operate the Santa Monica Restaurant in the ordinary course consistent with practices existing as of immediately prior to the Closing. Notwithstanding anything in this Agreement to the contrary, Seller shall bear all costs and expenses related to, or arising out of, the Conversion and the other transactions contemplated by this Section 5.20.
Another thing worth keeping in mind - this is a division sale. It's not a cash-out sale where Revlon duties apply. That's probably one reason why there is no fiduciary termination right in the sale agreement. Presumably, one could make Omnicare-like arguments that directors are required to include effective fiduciary outs in material corporate transactions, but there is a gray area -- where is the line between a merger or sale that doesn't implicate Revlon and where an effective fiduciary out is required and a division sale where one expects boards to receive the deference of business judgement? It's there somewhere, but where exactly?
Now, Wendy's didn't sell off all of Arbys. It hung onto 20%. Over at the Deal Journal, they call this move "schmuck insurance". Well, it worked for eBay.