(WEN) Wendy’s Drops Arby’s From Name

Wendy’s/Arby’s Group Inc (WEN) has dropped Arby from its name following the completion of its previously announced sale of Arby’s Restaurant Group. Wendy’s is once again a solo brand name and will operate as The Wendy’s Company going forward. However, Wendy will continue to trade under the ticker “WEN” on the New York Stock Exchange.

In January 2011, Wendy’s/Arby’s said that it intends to sell its struggling Arby’s business, so that the company can primarily concentrate on its better performing Wendy’s hamburger chain. Finally in June, Atlanta-based private equity firm Roark Capital Group agreed to buy a majority stake in Arby’s for $430 million including $130 million cash and $190 million worth of Arby’s debt.

However, Wendy’s has retained an 18.5% ownership interest in the Arby’s business, based on recent sign of stabilization at Arby’s. Arby’s reported marginal increase in its company-operated (6.8%) and same-store sales (4.8%) in North America during the first quarter of 2011.

Wendy’s and Arby’s came together in 2008, when Nelson Peltz and his investment firm, which already owned Arby’s, acquired Wendy’s International, Inc, the owner-operator-franchisor of the eponymous fast food chain. Since its formation, the combined entity failed to perform and reported poor results in most of the quarters.

Wendy’s, as an individual company, experienced higher growth opportunities with 6,565 restaurants in more than 20 countries. The company is exercising initiatives like value menu offerings, remodeling, introduction of new dayparts and setting up of new units globally to drive traffic and improve same-store sales. The divesture of Arby’s will also boost Wendy’s earnings and deleverage its balance sheet.

The company is expected to release its second-quarter financial results on August 11.

One of its competitors Yum! Brands Inc. (YUM) is also planning to divest its sluggish Long John Silver’s and A&W brands to concentrate more on its star performers like KFC, Pizza Hut and Taco Bell.

Wendy’s/Arby’s Group currently retains a Zacks #4 Rank (short-term Sell rating). We are also maintaining our long-term Neutral recommendation on the stock.

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