Divorce! Wendy's leaves Tim Horton's for single life

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Wendy's expected to spin off remaining stake in Tim Hortons by Oct. 1

Posted 6/28/2006

By David Friend

TORONTO (CP) - Wendy's International Inc. (NYSE:WEN) said Tuesday it plans to spin off its remaining 82.75 per cent stake in Tim Hortons Inc. (TSX:THI) to current Wendy's shareholders around Oct. 1.

The Ohio-based company also disclosed Tuesday that same-store sales at its Wendy's and Baja Fresh restaurants will be lower than expected in the second quarter, which ends this week. Wendy's also said it will have lower net income contribution from Tim Hortons in the second quarter, due to the spinoff of 17.25 per cent of the company through an initial public offer, as well as higher expenses related to the reorganization.

"The board's unanimous decision to spin off the remaining shares of Tim Hortons confirms the commitment that we initially made to shareholders," Wendy's chairman Jim Pickett said Tuesday.

The spinoff of Tim Hortons, acquired more than a decade ago by Wendy's, is part of an agreement made between Wendy's major shareholder Trian Partners. Nelson Peltz, head of Trian, had been pushing Wendy's to speed up the process.

Pickett said the spin off of the remaining Tim Hortons stake this fall "will quickly deliver value to shareholders and enable the management teams of both companies to focus on their respective strategies, operations and growth agendas," Pickett said.

Wendy's also said it expected lower second quarter results.

In an effort to reverse soft sales, Wendy's introduced a "Combo Plan" with the target of increasing sales by more than three per cent each year and reducing overhead costs by $100 million.

Part of the cuts included voluntary early retirement plans for about 175 of its full-time U.S. employees in May. Overall, Wendy's plans to reduce its workforce by 350 to 375 positions. Expenses related to retirement and severance packages would have an impact on second quarter earnings, the company said.

While same-store sales results for the Wendy's brand were the strongest the company had produced since January 2005, they were still below expectations, it said.

"Our second-quarter sales trends have improved compared to the first quarter, and we are optimistic about the initiatives to increase customer traffic for the remainder of the year," said CEO and president Kerrii Anderson.

Founded by its namesake Toronto Maple Leafs defenceman Tim Horton and Ron Joyce, a former Hamilton police officer and franchisee of the first Tim Hortons store, the iconic Canadian coffee and doughnut chain was bought by Wendy's in 1995.

Tim Hortons shares closed down 77 cents to $29.71 in Tuesday trading on the Toronto Stock Exchange.

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