Wendy's Reveals Acquisition War Chest <b></b>
Dublin, Ohio-Wendy's International Inc. has a $500million war chest readily accessible for acquisitions, according toits president Jack Schuessler.
In a conference this month, Schuessler told industry analyststhat the company has assembled a mergers-and-acquisitions team tomove forward with a previously reported diversification strategy.The plan, which would include a search for a third restaurantconcept, would be employed to boost Wendy's long-term growthopportunities.
Denny Lynch of Wendy's said the company is confident that itcan reach its current annual 12- to15-percent growth goals with itstwo existing brands, Wendy's and Tim Hortons.
"But if we want a higher earnings target, then we may needadditional revenue streams," Lynch explained. Wendy's saidit could handle about $500 million more in debt and still maintainits investment-grade debt rating. If the company makes noacquisitions, the cash on its balance sheet would grow to $500million by 2005, from $170 million currently, officialsindicate.
Wendy's said it would consider all segments of the foodservice industry from casual dining to fast food, but managementoffered few details on possible candidates and put no timetable onwhen a purchase might be made.
"Certainly we understand quick service, and we understandfranchising, so part of our M&A strategy will be to stay closeto what we do best," Lynch said.
Analysts who follow the company echoed Lynch's sentiment."I prefer something in the fast-casual sector or thenonhamburger QSR segment because that is where Wendy'sexpertise is," said Mark Kalinowski, a restaurant analyst withSalomon Smith Barney in New York.
When it comes to fast-casual concepts, Kalinowski saidWendy's might consider chains like St. Louis-based Panera BreadCo.-which has 260-plus units and is valued at about $275 million-orthe 50-unit Cosi sandwich chain from New York, which would carry asmaller price tag. But Kalinowski said he wouldn't rule out thepossibility of a larger acquisition as well, similar to the size ofthe Tim Hortons chain, which Wendy's purchased in 1995 for morethan $400 million.
Since the Tim Hortons acquisition, Wendy's has doubled thesize of the Canadian doughnuts-and-coffee chain from 1,000 tonearly 2,000 restaurants. -Nation's Restaurant News