NEW YORK (
is divesting its Arby's chain so it can focus its attention on reinvigorating its namesake restaurant brand, but the company is retaining what one analyst called "schmuck insurance," in case the new owners are able to turn the roast beef chain around.
The sale of Arby's "will allow Wendy's to focus on revitalizing their core brand," Scott Rostan, principal and founder of
Training The Street
. Wendy's/Arby's management will no longer be "distracted with chatter regarding Arby's performance or potential sale," he added.
The Arby's chain has long been a drag on Wendy's/Arby's financials, generally underperforming the Wendy's chain.
"Wendy's can put this behind them and move on," Rostan said.
Under the terms of the deal, Wendy's/Arby's will retain an 18.5% stake in Arby's, a point Rostan found particularly interesting, calling the clause "schmuck insurance," allowing Wendy's/Arby's "to capture some upside if the turnaround of Arby's is successful."
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Rostan compared Wendy's/Arby's "schmuck insurance" to the 35% stake in
retained after selling most of it to
eBay bought Skype for $2.6 billion in 2005, "dramatically" overpaying for the Internet phone service in Rostan's view, and was then forced to write down the acquisition. Then in 2009 eBay sold a 65% stake in Skype to an investor group led by private equity firm
Silver Lake Partners
In May of this year Microsoft acquired Skype for $8.5 billion in cash, giving eBay a chance to finally profit from its investment.
"By keeping the 35% minority stake, eBay avoided looking like a schmuck as a Skype investor," Rostan explained.
Wendy's/Arby's shares jumped 6.4% to close at $4.85 on Tuesday, a day after announcing the Arby's deal. Nearly 12.9 million shares changed hands, more than double the issue's three-month average daily volume of just 5.1 million.
Written by Miriam Marcus Reimer in New York.
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