OPINIONFinancing

Wendy's didn't help Arby's buy Buffalo Wild Wings

The company opted against further investment, but its ownership of Arby's has still paid off, says RB's The Bottom Line.

The Bottom Line

Wendy’s will only go so far when it comes to its continued ownership of a small part of Arby’s.

In 2011, the company opted to sell Arby’s to Roark Capital for a deal valued at $430 million, including just $230 million in cash.

As part of that deal, Wendy’s kept an interest in Arby’s—18.5%, to be specific.

When Arby’s agreed to buy Buffalo Wild Wings in a $2.9 billion deal, Wendy’s had an opportunity to participate and keep its interest at 18.5%.

Wendy’s certainly has the cash, now that it has refranchised most of its company-owned locations, which has made it a more profitable company.

But Wendy’s opted not to participate.

“We would rather reserve our cash to invest in our own initiatives,” CFO Gunther Plosch said on Wendy’s fourth quarter earnings call on Thursday.

As a result of the decision, Wendy’s ownership of what is now Inspire Brands is at 12.3%.

That doesn’t take away from the wisdom of Wendy’s decision to keep part of Arby’s after the sale. At the time, Wendy’s said it was a sign of faith in the brand and its future success.

Whether that’s true or not, that faith has been rewarded.  

Arby’s has been one of the more remarkable turnaround stories in the restaurant business in the years since, which has helped increase the value of that small stake—which at the end of 2017 was worth $325 million, Plosch said.

In addition to that increased value, Wendy’s over the years has received $100 million in dividends thanks to that ownership.

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