Wendy's Spikes on Takeover Talk

Wendy's shares spike as rumors of another high-profile private-equity buyout circulate on Wall Street.
Author:
Publish date:

ATLANTA (

TheStreet

) --

Wendy's Arby's Group

(WEN) - Get Report

may be the next high-profile restaurant chain to be taken private.

Shares of Wendy's spiked more than 8% on Thursday as speculation of a private equity buyout circulated on the Street. The fast-food chain is viewed as a relative laggard in the group, with its share price down 4.7% from a year ago through Wednesday's close, before buyout rumors began circulating.

Last month

Burger King Holdings

(BKC)

saw its share price skyrocket on word that it would be taken private by 3G Capital for $24 per share. Before those rumors began circulating -- and were then confirmed a day later -- the Whopper-and-fries chain's shares had fallen 8.3% year-over-year.

Shares of

McDonald's

(MCD) - Get Report

, meanwhile, are up more than 30% in the past 12 months.

Chipotle Mexican Grill

(CMG) - Get Report

shares have nearly doubled in the same period.

At such a low price point, Wendy's is likely viewed as a potential bargain for private equity groups willing to take it over and attempt to turn its operations around for the better.

Morningstar analyst Joscelyn MacKay noted that Wendy's is indeed a ripe takeover target and may be next to be taken private.

Deutsche Bank analyst Jason West noted that Wendy's is "one of the best values" in the restaurant space.

MacKay added that a Wendy's buyout remains purely speculative, but conceded that the company did say in a June regulatory filing that it had received a third party inquiry about a possible deal.

With the economy still very much in recovery mode and

the jobs market stubbornly weak

, consumers continue to be choosy about how they spend their limited discretionary funds. For the restaurant industry that means the competition is stiffer than ever, and some dining establishments are bound to go bust.

>> Bankruptcy Watch: 20 Riskiest Restaurant Stocks

Burger King agreed in early September to its $3.3 billion takeover. In July an affiliate of

Apollo Management

took

CKE Restaurants

private for $694 million. CKE owned the Hardee's and Carl's Jr. fast-food chains.

Mexican restaurant operator Rubio's was taken private by

Mill Road Capital

earlier this year for $8.70 per share.

A number of other restaurant chains have been speculated to be ripe for takeovers as well.

"The right private owner might help one or more of these chains eventually become better, and likely smaller, competitors" to McDonald's, UBS wrote in a note to investors last month.

The note tapped

Sonic

(SONC)

,

Jack in the Box

(JACK) - Get Report

and Chili's operator

Brinker International

(EAT) - Get Report

as other potential restaurant stocks that may be targets for private-equity buyouts.

-- Written by Miriam Marcus Reimer in New York.

>To contact the writer of this article, click here:

Miriam Reimer

.

>To follow the writer on Twitter, go to

http://twitter.com/miriamsmarket

.

>To submit a news tip, send an email to:

tips@thestreet.com

.

READERS ALSO LIKE:

>> 3 Restaurant Stocks to Buy Now

>> Burger King Agrees to Buyout

>> Bankruptcy Watch: 20 Riskiest Restaurant Stocks

>>See our new stock quote page.

Get more stock ideas and investing advice on our sister site,

Stockpickr.com.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.