Transcripts

Arby's Finds The Beef By Buying Wendy's

PAUL KANGAS: In other corporate news today, hamburger giant Wendy's International is being swallowed by Arby's parent Triarc. As Erika Miller report, the $2.4 billion all stock takeover completes Wendy's year-long search for a buyer.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: The deal between Wendy's and Arby's parent Triarc ends a long and very public food fight. Since last summer, Wendy's has rejected several buyout offers from Triarc's chairman, billionaire investor Nelson Peltz. Peltz is a major shareholder of Wendy's and has been turning up the heat on the chain. Standard & Poor's analyst Mark Basham says Wendy's finally surrendered after a series of failed efforts to boost sales.

MARK BASHAM, EQUITY ANALYST, STANDARD & POOR'S: They've changed their advertising a couple of times. They've tried to switch up the menu, to get, first to get higher premium products on the menu. And when that didn't work, they tried a value approach to drive traffic. And that really hasn't worked in my opinion.

MILLER: The new company will still be the nation's third largest food chain, with over 10,000 restaurants and more than $12 billion in annual sales. The companies say the merger will help both chains lower costs, but analysts aren't convinced.

BASHAM: The intention I believe, is for both companies to operate completely independently of each other at least for the time being. So any sort of synergies you might expect in back office operations or corporate overhead or in purchasing, in advertising purchases. I don't see any of that.

MILLER: Wendy's big drop in first quarter earnings is evidence of its problems. Today, Wendy's said profits fell to $0.10 a share from $0.16 a year ago and $0.07 shy of estimates. Branding expert Andrea Sullivan says Wendy's has had trouble finding its niche.

ANDREA SULLIVAN, EXECUTIVE DIRECTOR, CLIENT SERVICES, INTERBRANDS: It's interesting, if you look at the Wendy's brand, I think it's appealed to more of a nostalgic feeling. And the brand itself has been really anchored to Dave Thomas. And since his passing, I think it has been an opportunity to look at how should Wendy's really revitalize its image overall.

MILLER: Larger rivals McDonalds and Burger King also have the advantage of more efficient distribution systems which can help offset rising commodities prices. In addition, those two chains have benefited from strong overseas sales and the weak dollar. Analysts say the weakening economy should also help fast food companies in the months ahead. When money is tight, families increasingly pick fast food restaurants over pricier dining chains. Erika Miller, NIGHTLY BUSINESS REPORT, New York.