After years of squabbling, Wendy's and Arby's unite

After more than two years of bickering, Wendy's International and billionaire investor Nelson Peltz have tied the knot, but whether this is a marriage for the ages, or just a dysfunctional one, remains to be seen.
    Wendy's, the financially troubled fast-food chain, said last week that it had agreed to sell itself for $2.3 billion to Peltz's Triarc Cos., the parent of the Arby's restaurant chain. The deal will create one of the nation's largest fast-food chains.
    Wendy's and Triarc agreed to a stock swap in which Wendy's shareholders will receive 4.25 shares of Triarc for each of their shares. The deal valued Wendy's around $27 a share, or a 5.8 percent premium.
    The deal may offer some relief to Wendy's stockholders, whose shares have fallen more than 50 percent in value over the past two years. The company, whose earnings last quarter disappointed Wall Street analysts, has struggled since the death in 2002 of its founder and avuncular spokesman, Dave Thomas.
    These days, it is contending with a worsening outlook for restaurants and higher prices for ingredients such as beef and chicken, as well as increased transportation costs.
    The merger news overshadowed a dismal earnings report by Wendy's, which disclosed $4.1 million in operating profit for the first quarter, a drop of nearly 72 percent from the period last year.
    Combined, Wendy's and Arby's will have 10,000 restaurants and sales of $12.5 billion, though they will still be run as separate units after the closing of the deal, expected in the second half of the year.
    The companies said they planned to expand their breakfast and snack offerings, an effort meant largely to catch up with McDonald's and Burger King.
    Last week's deal is rooted in a long and contentious campaign by Peltz, an activist investor who has pushed for change at H. J. Heinz, Cadbury Schweppes and Kraft.
    Two of his investment vehicles played roles in the eventual sale of Wendy's. Peltz is the chairman of Triarc, and both he and its vice chairman, Peter May, own 35 percent of the company's stock. But Peltz and May also lead Trian, a hedge fund that now owns 9.8 percent of Wendy's stock.
    Peltz began pushing for changes at Wendy's late in 2005, after disclosing he held a 5.5 percent stake in the company. Trian gained three board seats by March 2006 and helped prod Wendy's into spinning off Tim Hortons, the Canadian coffee-and-doughnuts chain.
    But Wendy's fortunes failed to improve, despite steps such as a share-buyback program and new marketing efforts for its Super Value Menu.
    By July 2007, it disclosed that it was trying to find a buyer - just weeks before the credit markets dried up .
    Trian continued to urge Wendy's to consider a sale despite the credit squeeze, while Triarc said it was willing to make an offer. But Wendy's repeatedly rebuffed Triarc's proposals. In February, Peltz threatened a proxy fight, saying he would name six candidates for the company's board.
    Last week, May and James Pickett, the chairman of Wendy's, sparred in an exchange of letters. May complained that two Triarc proposals had been summarily rejected; Pickett argued that the financing was too conditional to be relied upon.
    The two sides appear to have patched things up.
    At a glance
    * The combination will have approximately 10,000 stores and annual sales of $12.5 billion, creating the third-largest, fast-food restaurant company in the U.S.