050606 Wendy's Investor Wants Strategic Changes

New York - A major investor in Wendy's International Inc. has hired private equity firm Blackstone Group LP to come up with ways to restructure the nation's third-largest hamburger chain in the face of sluggish sales, according to a regulatory filing.

Pershing Square Capital Management LP, which owns a 9.9% stake in Wendy's, said in a filing with the Securities and Exchange Commission that it wants to find "alternative" transactions to help boost shareholder value. Among the recommendations might be selling off a part of Wendy's business, or a general reorganization.

Wendy's shares rose to an all-time high, adding $1.39, or 3%, to close at $47.90 on the New York Stock Exchange. That topped a previous 52-week high of $47.20 from earlier this week.

Wendy's has been struggling with a steep decline in sales during the first quarter, due in part to a now- discredited claim that a customer found a finger in a bowl of chili. The Dublin, Ohio-based company claims that the worst is over, and that a new marketing effort has begun to revive its bottom line.

Wall Street analysts, however, have expressed worry that fallout from the finger story — along with high beef costs, rising gasoline prices and a lack of significant improvements in the menu — will cut into earnings this year. Wendy's has seen much of its business shift toward bigger rivals McDonald's Corp. and Burger King Corp.

Pershing Square Capital Management — which owns more than 10.2 million call options to buy Wendy's common stock and 1.1 million Wendy's shares — said in the SEC document it might suggest to the fast-food chain's management that shareholders receive a special dividend or merge with another company. There also has been speculation about restructuring Wendy's to become a real estate investment trust.

Wendy's has more than 9,700 restaurants that it operates under the names of Wendy's, Tim Hortons and Baja Fresh Mexican Grill. It also has invested in the Cafe Express and Pasta Pomodoro chains.

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