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Starbucks (SBUX) founder and CEO Howard Schultz had his company release the list of 600 stores that coffee chain would close. It is a tombstone for the 12,000 company employees that Starbucks will push out of work and a monument to the firm's arrogance.
Continue reading "Starbucks Releases List Of 600 Stores To Be Shut, A Tombstone For Employees" »
Yum! Brands Inc. (NYSE: YUM) just posted earnings and the fast food giant posted $0.45 EPS on $2.65 Billion in revenues (after $330 million in license fees). First Call had estimates at $0.42 EPS and $2.55 Billion revenue.
As far as guidance, the food giant gave a $0.02 higher guidance number than before so the new number is $1.89 EPS (12% growth). First Call has estimates of $1.89 EPS, so the company is only catching up to estimates that are already ahead of the company.
Most of the comments were upbeat with total international sales up 15% and China sales up 43%. Global same store sales rose 4% and same store sales in China rose 14%. Even the U.S. saw 2% same store sales growth. The company said that foreign currency conversions did account for $8 million in Q1, about the same as Q1.
Shares closed up 2.85% at $36.47 today and shares are actually down about 1% at $36.00 in the initial reaction in after-hours trading. Its 52-week trading range (split-adjusted) is $28.37 to $41.73.
Jon C. Ogg
July 16, 2008
Here is the list of stores that Starbucks (SBUX) will close in July 2008.
Starbucks plans to close a total of 600 stores and lay-off 12,000 full-time and part-time employees in an effort to save money now that its US same-store sales are slowing considerably.
Based on information obtained by 24/7 Wall St., Michigan, one of the hardest hit states in the economic downturn, will lose 20% of its Starbucks stores.
Douglas A. McIntyre
Howard Schultz, the CEO and founder of Starbucks (SBUX) is, by any measure, a fabulously wealthy man. He owns 4.4% of the company's shares. SBUX has a market cap of just over $10 billion, so Schultz has lost about two-third of the value of his shares in less than two years.
According to the SBUX proxy, Schultz made $1.19 million in salary last year and had "other" compensation of just over $861,000. Of that, $496,000 went to security. Since Schulz has a large number of sullen employees, the investment may be wise.
Schulz was paid very well for a man who was not the company's CEO during the year. But, rank has its privileges .
Starbucks recently fired 12,000 full-time and part-time workers. Among them are a number of poor souls who were paid modestly for helping Mr.Schultz build his empire, and his fortune. Some rich CEOs would elect to take an annual salary of $1 to show some sympathy toward shareholders and employees.
There is a fiction that Schultz was "out of town" during the years that Starbucks expanded too quickly for its own good. For a man on vacation, he was paid well. The reality is that it would be highly unlikely that the management team that he sacked when things began to go badly operating entirely without his hand on the wheel, even if it was joined by several others.
Starbucks stock is still selling off because Wall St. does not believe that Schultz has either the vision or operational acumen to get the business right. He is not a straight shooter, which is one thing that the financial community loathes. In his recent memo about job and store cutbacks, the first two paragraphs were PR gibberish with things like Pike Place Roast, Mystarbucksidea.com, and Health and Wellness
Health and Wellness will not do anything to bring back shareholder losses or the jobs of the blindly faithful who were pushed under the bus.
Other than that, Schultz tenure are CEO is going fine.
Douglas A. McIntyre
The fight between Anheuser-Busch Companies, Inc. (NYSE: BUD) and InBev over the proposed $65.00 merger is one that is about to get more heated rather than one that looks more amicable. Anheuser-Busch doesn't want to sell, InBev wants to force a sale.
Anheuser-Busch is apparently suing to block the InBev offer. InBev is demanding, or certain Anheuser-Busch shareholders are, a record date for the "as of" dates for the offer and other issues. The plot to this story is likely to thicken before it thins. InBev is also going after the board of directors to replace them, and it has even taken the case up in a St. Louis newspaper full page advertisement.
If InBev really wants to win the favor of the company's board and many of the concerned shareholders out there, it is likely going to have to pony up more cash. The stock isn't worth $70.00 today to an American, Latin, or Asian buyer, but to Europeans they would be getting the company for a song when you consider the added Euro strength that has gone to the far end of the spectrum and beyond.
Despite this being a $46+ Billion acquisition, we think that InBev is ultimately going to have to pay up if it really wants to acquire the King of Beers. There is a premium around Anheuser-Busch shares, but nowhere near the premium in other mergers. If the board of directors fights off a buyout and gets to go back to a business-as-usual operation without a hostile bidder, we think this will drop to $57.00 on the high side or down to as low as the low-$50 handles. That is not a shareholder reward at all, but it isn't representative of a board like a certain #2 Internet search engine giant that seems hellbent on destroying shareholder values.
If you are sitting on long-term gains here as a result of the pop, looking at the SEP08 $60 PUTS at $2.60 per contract might have offer significant protection for your gains here. We don't know what the board plans ultimately, but our one cautionary word after studying special situation investing for years and years would be as follows:
Sorry to point this out, but don't all the Europeans say Budweiser hardly counts as beer?
Jon C. Ogg
July 8, 2008
Twelve thousand souls are losing their jobs at Starbucks (SBUX), mostly because Howard Schultz let incompetents run his empire while he was occupied elsewhere. It will always be open to debate whether things would have been different if he had stayed on as CEO, instead of returning recently when things at the coffee company were getting bad.
In a superb article in The New York Times, the paper analyzes what may have been the worst decision by Starbucks executives. In the surge of rapid expansion in the US, they put many of their stores in the wrong places.
According to the article, "the company was so determined to meet its growth promises to Wall Street that it relaxed its standards for selecting new store locations." How could Starbucks, which knew very well where to put stores, make such a basic error?
Hubris. Starbucks believed that its products were so good and its brand was so strong that it could expand in the US and abroad no matter what the economic conditions were. The profound miscalculation is based on the notion that the number of customers who would come to Starbucks is nearly endless. The same idea has ruined a number of companies and industries over the years. It is the trap of thinking that the concept behind a firm is flawless and that execution is not as critical as the original idea.
That way of thinking eventually costs a lot of people their jobs.
Douglas A. McIntyre
Standard & Poor's (via its Ratings Services) has placed its corporate credit ratings on Starbucks Corp. (NASDAQ: SBUX) on CreditWatch with negative implications. This pertains to the corporate ratings including the 'BBB+' long-term corporate credit and 'A-2' short-term ratings.
This move on CreditWatch come after word that it will close approximately 600 underperforming company owned stores in the U.S. S&P noted that this is far more than the 100 store closures previously announced.
The credit action is also based on the internal cost estimates of between $328 million and $348 million, with cash charges of about $100 million on an after-tax basis.
S&P also noted the slower growth of U.S. stores to less than 200 in 2009 as the reason for CreditWatch. It is important that S&P said in its release that it does not expect credit metrics to change significantly due to the charges....
But S&P did also say it would reassess Starbucks' business risk profile in light of lower consumer spending, revised growth plans, and increased competition.
Before this ratings action we had seen Starbucks shares trading up close to 3%, but shares are now only up 0.3% at $15.67 on light to normal trading volume.
Those old analogies of "how can a coffee company trade with a P/E ratio north of 50?" are now no longer looking just pessimistic and nay-saying. They are starting to look like an omen.
Jon C. Ogg
July 2, 2008
Howard Schultz, the founder and CEO-for-life of Starbucks (SBUX) is almost completely responsible for the catastrophe at his company. Two years ago, he pointed out the problems with the coffee chain's approach. He waited another year to do anything about it. He has been the company's largest shareholder since it was founder and was chairman for most of that time.
Schultz now gets to cast himself as a heroic figure, marching back into Starbucks (SBUX) to save it from incompetent management, like Arthur returning to England to restore justice in the land. Someone's missteps cost 12,000 Starbucks employees their jobs. The SBUX public relations staff called the move "the next step in its multi-faceted plan to transform the company." In other words, Starbucks is in deep trouble and a number of people will pay with their jobs.
But, it was the overreaching ambition of Schultz that got the company into hot water. Starbucks did not need to build out stores at the rate that it did. Why did it add sales of music, breakfast sandwiches, and Apple (AAPL) iTunes? Schultz thought the premium coffee business could not be hurt by a recession. He was terribly wrong.
Aside from the poor souls being booted out of the company, the victims of the Schultz approach are the shareholders. The company has lost well over half of its value during the last two years.
Schultz can't make himself look good now, no matter how hard he tries.
Douglas A. McIntyre
Howard Schultz, the CEO for life at Starbucks (SBUX) recently told Portfolio magazine all about his plans to turn around the company. The editors should not have bought a word of it.
In the face of a disintegrating US business, the company announced that it would close approximately 600 underperforming company-operated stores in the U.S. market. The PR spin on the news was astonishingly transparent. SBUX called it part of a "multi-faceted plan to transform the company."
The decision will cost the company on the bottom line. Pre-tax charges related to the store closings include approximately $200 million of asset write-offs to be recognized in the third quarter of fiscal 2008. A projected $120 to $140 million for lease termination costs and future lease obligations are currently expected, nearly all of which will be recognized in the fourth quarter of fiscal 2008 and the first half of fiscal 2009.
The stock, already near a 52-week low at $15.60, moved down further after hours. The Schultz show is not playing on Wall St.
Douglas A. McIntyre
Fortune Brands, Inc. (NYSE: FO) has come clean with a lowered earnings guidance for the current quarter and full year of 2008. The company noted that a weakening consumer sentiment in the U.S., the ongoing correction in the U.S. housing market, and a large and unexpected Australian tax increase on ready to drink spirits products have all culminated together to create a more challenging environment for the company’s products.
The company now expects pre-charge/gain earnings to be down at a high-teens-to-mid-20's percentage rate compared to diluted EPS of $1.51 before charges/gains for continuing operations in the year-ago quarter. This is worse than its previous forecasts of being down at a high-single-digit-to-mid-teens percentage rate. If we maximized the warning and took a mid-20's percentage rate, this could generate an effective EPS report of $1.13. First Call has estimates at $1.32 currently.
It does expect that results in the second half of 2008 will be better than the first half because of company-wide productivity initiatives and increased brand-building investments. For the full year 2008, the company now expects to generate diluted EPS before charges/gains that is down at a high single-digit to high-teens percentage rate compared to $5.06 in 2007. The company’s previous full-year target was for diluted EPS before charges/gains to be flat to down at a high-single-digit percentage rate versus 2007’s results.
If we interpolate that earnings, this could be anywhere from around $4.10 to $4.60 depending on where your starting point is. Current First Call estimates are $4,79 EPS, so either way this is a big shortage.
Fortune closed up marginally by $0.04 in regular trading at $62.41 today. Shares are now down almost 5.5% at $59.00 in after-hours trading. Go ahead and chalk that up as another 52-week low. The prior range was $62.01 to $90.80. So much for good old fashioned booze as being a defensive sector.
Jon C. Ogg
June 30, 2008
Sonic Corp. (NASDAQ: SONC) has come out after the close with reduced guidance. The outdoor drive-up burger chain is feeling the pinch from raw materials costs, labor costs, food costs, transport costs, and probably a gas-starved suburban driver client base.
The company sees a 10% decline in Q3 net income to $0.28 EPS versus $0.31 in the prior year. The company noted that Q3 revenues were up 1% to $213.0 million. First Call is expecting $0.31 EPS on $219.95 million.
It also sees a -0.4% decline in system-wide same-store sales resulting primarily from weather-affected sales in March; system-wide same-store sales improved as the quarter progressed and returned to the company's targeted growth range of 2% to 4% in May. The company did notes that the traffic for the quarter was slightly positive.
The company also had an opening of 41 new drive-ins in Q3, with the relocation or rebuild of 17 existing drive-ins, and the completion of 279 retrofits.
Sonic expects that its Fiscal 2008 EPS will increase in the range of 4% to 6% in fiscal 2008 versus fiscal 2007 earnings per diluted share of $0.96. While that number is adjusted for prior-year debt refinancing charges. That is only out to August 2008 and the First Call estimate is $1.05 EPS.
Sonic shares closed up 1.3% at $16.51 in regular trading, and its shares are down over 3.5% at $15.90 in after-hours. Its 52-week trading range is $15.65 to $26.19.
Jon C. Ogg
June 24, 2008
Panera Bread Company (NASDAQ: PNRA) is issuing some mixed guidance this morning, although shares are reacting favorably to the news. The company is increasing its second quarter 2008 earnings per diluted share target to $0.48 to $0.50. Its prior guidance was $0.40 to $0.44, and First Call had estimates at $0.42 EPS. The increase is from same stores sales growth of 6.1% to 6.4% rather than a previously targeted range of 5% to 6%. It is also seeing a better than expected margin improvement on higher growth in gross profit per transaction.
This isn't universal though. Panera also noted that the continuing rise in gas prices will generate an incremental $0.02 to $0.03 negative impact on earnings per share for the second half of 2008, which it will update in its earnings report to be released on July 22, 2008.
It has employed some hedging strategies, although only for a limited time period. Panera has locked in approximately 95% of its fiscal first and second quarter 2009 wheat requirements at a total cost of approximately $10.00 per bushel versus the approximately $15.00 per bushel paid for the same period in 2008. Panera HAS NOT locked its requirements for the third and fourth fiscal quarters of 2009, as it noted that suppliers are not offering commitments on basis for that time period. It does expect to benefit from the year-over-year decrease in wheat costs in 2009, but also notes that part of that benefit will be offset by higher commodity costs in proteins, dairy, packaging, and the increasing cost of gasoline.
Shares closed at $45.46 yesterday and shares are up over 7% at $48.94 in pre-market trading with 45 minutes to the open. The 52-week trading range is $30.60 to $53.45.
Jon C. Ogg
June 18, 2008
Landry's Restaurants, Inc. (NYSE: LNY) has announced that it has entered into a definitive agreement with Fertitta Holdings, Inc.
Fertitta has agreed to acquire all outstanding common stock for $21.00 per share in cash. This represents a premium of approximately 37% over the closing share price of the Company's common stock on April 3, 2008. This was the last day before disclosure of the revised offer made by Mr. Fertitta to acquire the company. The total value of the transaction is approximately $1.3 billion, which includes approximately $885.0 million of debt.
Fertitta is a newly formed entity wholly owned by the company's Chairman, President, CEO and original founder, Tilman J. Fertitta. Mr. Fertitta beneficially owns approximately 39% of the Company's outstanding shares of common stock.
In short this is nothing short of a management led buyout, and one that many thought was a dead deal before the revisions. Shares closed at $16.79 on Friday and the equity market cap of the stock was $271 million.
As with most management led buyouts where the founder controls a huge portion of the stock, there are likely to be any "higher bids" that magically come from elsewhere. The only issue here that might seem to come up is that this acquisition price still buries shareholders who owned this stock before 2008. Whether or not those older shareholders can mount any demands for denial or demands for money is another issue all together.
You can join our open email distribution list to hear about other mergers, IPO's, secondary offerings, private financings, activist investors, and more.
Jon C. Ogg
June 16, 2008
Starbucks (SBUX) is going to put another 150 stores in Europe. They are closing them in the US, so perhaps it all balances out.
The coffee chain has come up against competition from places like McDonald's (MCD) and Dunkin Donuts in the US. And, the economy does not support people who can buy $5 a cup coffee.
Maybe Europe is different. But, McDonald's is there along with a recession.
Starbucks is doing a clever job of hedging its bets as it expands on the continent. Instead of opening its own stores, it will "license 150 new locations in Britain, France and Germany over the next three years in a deal with UK group SSP," according to Reuters.
The news seems to be telling about Starbucks level of confidence in itself as a company. It could open its own stores in Europe, take all of the risk and all of the reward. Instead, it is inching in. That says a great deal about the firm's view of itself.
Starbucks is not only doing poorly, it is losing its appetite for putting its own capital, both financial and human, on the line.
Douglas A. McIntyre
CNBC's David Faber just broke news that InBev is closer to making a formal bid for Anheuser-Busch Companies Inc. (NYSE: BUD). He said that this bid could come in the next couple of weeks and may likely be on an unsolicited basis. Over at Volume Spike (vsinvestor.com) we just noted in the last 60 minutes about a sudden increase in the call option activity in the near months expiration dates.
Shares had been down prior to the Faber report, but now shares are up 1.2% at $57.80 and have now traded more than average day's trading volume.
We had noted the same sort of movement a couple weeks ago and that was also right ahead of some additional stories pointing to the possibility of a bid coming. The expected amounts for a bid at the current time have only been "discussed" as being in the $60 to $65 per share range.
Stay tuned. As this still has founding family descendants involved, it could get interesting. As a reminder, until InBev or others come out with formal terms that this is still not much of a step above "rumor" status because of how long this has been pending and discussed.
Jon C. Ogg
June 11, 2008
In yet another beloved move by 'independent ratings agencies,' Moody's Investors Service has placed the Debt Ratings (not equity) of Yum Brands Inc. (NYSE: YUM) on review for a possible downgrade. The company's senior unsecured debt rated Baa2 and guaranteed senior unsecured debt rated Baa1 were the ratings placed on negative review.
Moody's cited the owner of Taco Bell, KFC, Pizza Hut, and others as having weaker than expected debt protection metrics because of its higher operating costs pressuring margins. The review will focus on the impact of Yum's operating performance, capital structure, and its financial policies and what the impact will have regarding its debt levels farther out on the horizon. Two more key issues were the higher than expected debt levels and the under expectations in operating profits. Also noted were higher operating costs for commodities and the weak consumer environment in the U.S. ultimately pressuring margins.
The negative review also noted that Moody's doesn't expect Yum Brands' condition to improve
over the immediate or intermediate future.
Yum shares are down about 0.5% at $37.81 on normal trading volume. As a reminder, debt ratings of this magnitude aren't a direct stock exposure report. But as stocks go from investment into (or closer to as this implies) junk status it does generally drive up borrowing costs. As of March 22, Yum had $3.372 Billion listed in direct long-term obligations and some $6.534 Billion in total liabilities.
Jon C. Ogg
June 10, 2008
Corn prices hit an all-time high overnight. There has been too much rain on the farms where it is raised in the US. The cost of the stuff is up 47% this year. Corn production is expected to be flat over the next 12 months.
It did not have to turn out this way. Monsanto (MON) recently remarked that it could "develop seeds that would double the yields of corn, soybeans and cotton by 2030 and would require 30 percent less water, land and energy to grow."
The fact of the matter is that Monsanto already has seeds which will grow on asphalt and barely need watering at all. Farmers and consumers of grain-based food have been afraid of gene-altered seed. They have feared it will make them glow in the dark or cause them to look like the aliens in "ET".
While there may be some truth to the fact that "new age" corn and other grains may not taste as good as the real stuff, there is little if any evidence that it causes humans to grow extra limbs or lose their hair.
It could be argued that it was not hard to see the food crisis coming. Millions of farmers have been driven off their land by political battles in place like Africa. Global warming causes odd and unexpected periods or drought and flooding. Each and every year, there are more people to feed.
The liabilities of products from companies like Monsanto, if there are any, are more than offset by the misery, human and financial, caused by food shortages and higher food prices.
Better to look like Popeye the sailorman than pay $100 for a loaf of corn bread.
Douglas A. McIntyre
The J. M. Smucker Company (NYSE: SJM) and The Procter & Gamble Company (NYSE: PG) Folgers unit have confirmed yesterday's reports that the two companies are going to merge. The Folgers coffee business was going to be spun-out of P&G already, and this will more quickly exact that transaction.
Folgers will merge into The J. M. Smucker Company in an all-stock "reverse Morris Trust" transaction valued at approximately $3.3 billion. This number includes an estimated $350 million of Folgers debt.
As part of this transaction, Smucker is going to issue a one-time special dividend of $5.00 per share to current Smucker shareholders as of the record date ahead of this merger. Following the one-time dividend, P&G shareholders will receive approximately 53.5% of Smucker in a tax-free stock-for-stock merger.
The company believes that the deal will be accretive in 2009, assuming a 2008 deal closing date with Folgers contributing $80 million in net income and $820 million in EBITDA. The company sees a combined 2009 estimated sales number of $4 Billion, with earnings per share before one-time items at $3.45 to $3.50 EPS. For 2010, it sees $3.62 EPS.
You can join our open email distribution list to hear about other mergers, special financings, IPO's, secondary offerings, restructurings, and other special situations.
Jon C. Ogg
June 4, 2008
If you have been a "diet" or zero calorie soft drink beverage drinker or have used artificial sweeteners on foods, there has always been the issue of "what are you putting into your body?". Most sugar-substitute sweeteners on the market have a myriad of chemicals or are derived from sugar. Finally this is about to change, and the change will be official.
Last year there was a report on CNBC citing the WSJ that Coca-Cola Co. (NYSE: KO) had teamed up with Cargill to develop and market a new calorie-free natural sweetener in an attempt to appeal to a growing band of health-conscious consumers. The problem is that this from the Stevia plant, and it is not approved as a "food additive" in the U.S. nor in Europe.
The most recognized brand for Stevia is SweetLeaf(R), under parent Wisdom Natural Brands(R) based in Gilbert, Arizona. Until now this had to be sold as a "dietary supplement" and could not be marketed as a sweetener because Stevia is not approved as a food additive in the U.S. nor in Europe. SweetLeaf(R) Sweetener(TM) has recently achieved GRAS status (generally recognized as safe) via outside independent review.
The regulatory and production challenges that hindered Coca-Cola's & Cargill's "rebania" product may soon be about to change. Stevia comes from an all natural plant root and has been used as an "artificial sugar-free and calorie-free sweetener" for years by many. Cargill's website links you to its own Truvia(tm), and Cargill made their announcement in mid-May calling it a sweetener.
This nod might not do anything for the production challenges and current supply limitations that may exist. But this a great start. Coca-Cola has many patents that may cover this, but you can be assured that Pepsico (NYSE: PEP) and other food and beverage makers may take an interest if they haven't already.
It's always touchy writing about a product you use or a product you like, because the objectivity becomes skewed. But this is something that is written about with some cheer. The truth is that some people love the flavor or sweetness of Stevia, and many don't. This won't lead to a category-killer product that kills all traditional soft drinks nor will it kill all diet drinks and other sugar substitutes or sweeteners in foods. But it will lead to a new category of sugar-substitute drinks and foods that have previously not been allowed on the market.
Jon C. Ogg
June 3, 2008
McDonald's (MCD) is taking a risk, but it may be a clever one.
The world's largest fast food chain will absorb most of the rising prices of food commodities to keep prices which customers pay low. That means the $1 menu items will not go to $1.50.
According to Reuters, MCD Chief Executive Jim Skinner said "This is not the time to be passing that on to consumers. They have long memories."
The move could push down margins in during the next year, but it should cause same-store sales to outpace virtually all MCD competitors.
Douglas A. McIntyre
Yesterday was a more than interesting day for Starbucks Corp. (NASDAQ: SBUX). The stock rose more than 6% to $17.05 after funds disclosed stakes in the coffee retailing giant.
Activist investor Nelson Peltz disclosed that he had taken a stake of more than 842,000 shares via his Trian Partners as of March 31, 2008. Starbucks' problems go back farther than that and shares were at $17.50 on that date. This stake is worth a little more than $14 million after Friday's gain. Another hedge fund called Maverick Capital had taken a stake of about 12.5 million shares, which is a much more significant stake.
Peltz has made things work out elsewhere, including an on and off victory at Wendy's. The problem is that there are roughly 728 million shares in Wendy's with a market cap north of $12 Billion.
Schultz has only been back in charge for so long. His changes he is making are good to a point, but many of his internal changes need to take place. His long-term forecasts may end up being a matter of "Excuse me, could you please repeat that for the jury?" in effect. There was also that recent earnings warning and our old Starbucks 2008 value at $18 or $22 or $26 was long before the softening economy turned Starbucks into a discretionary expense that got cut. If you look at our own re-visitation and evaluation of Starbucks stores we did last month, you'll see that the company has not started doing enough internally to remedy its cleanliness, presentation, image, inventory and more.
We reviewed Capital IQ and it was surprising to see that Starbucks actually has very light defenses and is not immune from pressure. But Peltz is going to have to pony up much more than this and even more than Maverick Capital if he wants to exact some significant changes there. As of last year, Schultz owned more than 17 million shares. At some point he'll want to buy more while shares are on the floor to show a sign of conviction.
This data is 45 days old so it is very possible that Peltz may have been able to turn his attention away from Wendy's and grow his stake. Then again, he might not have yet been able to. Many times activists take a stake and never get around to doing anything about it other than being able to advertise that they have the stake.
Until then, Starbucks shouldn't be worth much more than it was on Thursday.
You can join our open email distribution list to hear about other restructurings, activist stakes, reorganizations, IPO's, and special situations.
Jon C. Ogg
May 17, 2008
Del Monte Foods Company (NYSE: DLM) is responding to written reports and confirmed that the company is exploring strategic alternatives for its seafood business, which could include a potential sale of the business.
Of course it cannot assure that its exploration of strategic alternatives will result in a transaction and that the Board of Directors has not approved a transaction at this time.
Del Monte Foods generated $3.414 Billion in sales for fiscal April 29, 2007, and StarKist Seafood operating segment had sales of $542.4 million, a decrease of $23.5 million or 4.2%, compared to fiscal 2006. Del Monte's total market cap is $1.87 Billion with shares down about 1.6% today.
The company also noted that it and two others accounted for some 79% of the canned tuna market, with Del Monte's StarKist having some 33.7% of that market.
StarKist is a brand that it should be able to unload rather easily despite some of the slowing from 2006 to 2007, or so it would seem. Owning that much market share is perhaps value enough, particularly if this can be combined with another operation.
You can join our open email distribution list to hear about other break-ups, secondary offerings, IPO's, secondary offerings, special financings, mergers, spin-offs, and other special situations.
Jon C. Ogg
May 16, 2008
Jon Ogg produces and edits the "10 Stocks Under $10" newsletter and he does not own securities in the companies he covers.
Tuesday after the close, we’ll get to see earnings out of Whole Foods Market Inc. (NASDAQ: WFMI). The estimates for the organic food grocer from First Call are $0.30 EPS on $1.89 billion in revenues. Next quarter estimates are $0.35 EPS on $1.96 billion in revenues. Estimates for fiscal Sept-2008 are $1.28 EPS on $8.27 billion in revenues.
Analysts have an average price target north of $41.00. Whole Foods Market Inc.’s 52-week trading range is $29.99 to $53.65. In the last 90 days, shares have slid from over $40.00 down to $33.75 Monday, and that was after Monday's gain of almost 3%.
What is obvious here is that the bar is being set very low going into earnings because of the recent performance. At least if the company doesn't do well on earnings, we might get mass message board postings from Rahodeb.
What we have to already expect is margin compression. Whole Foods already charged much more for the exact same organic or healthy products that you have been able to buy at Kroger and elsewhere. In the current environment where consumers are looking at ways to pinch pennies, we'll find out if Whole Foods has remained a staple for the well to do or if it is becoming going to be categorized as luxury goods that the masses are priced out of.
For whatever it's worth, I have never personally seen any real slide in the raw number of people there. At the same time, the locations where Whole Foods stores are located in are often as recession proof as it gets.
Jon C. Ogg
May 12, 2008
McDonald's Corporation announced today that global comparable sales increased 5.0% in April and 6.8% year-to-date. Systemwide sales for McDonald's worldwide restaurants increased 13.7% in April, or 6.5% in constant currencies.
U.S. comparable sales rose 2.0% for the month as McDonald's breakfast menu, new products and compelling value attracted more customers into our restaurants.
Douglas A. McIntyre
Starbucks began the rocky phase of its relationship with Wall St. when its former CEO said that the company would eventually have 40,000 outlets. It had well under half of that when the prediction came out two years ago. Everyone in the financial district grabbed an abacus and figured Starbucks would have 20% annual earnings growth for a decade.
All of a sudden, a few months ago, Starbucks started to signal that its stock was not the stuff that dreams are made of. Slowing US sales cost the company's CEO his job and shareholders more than half of their money.
Yesterday, Starbucks indicated that it had not heard the saying that those who do not learn from history are bound to repeat it.
The coffee company came out with an immodestly detailed plan which took its financial projections through the end of its 2011 fiscal year. With audacious precision Starbucks walked investors through the number of stores it would open each year, it use of capital, EPS growth, and operating margin targets. The company even forecast its tax rates.
Arrogant is as arrogant does. If Starbucks proved one thing over the last year it is that it has no talent for predicting what will happen to its business. It does only sell coffee, has a lot of new competition, and has no idea what will happen to the global economy.
Other than that, its forecasts are flawless.
Douglas A. McIntyre
In a sign of self-loathing, Starbucks (SBUX) is turning to non-coffee drinks to rescue it. The coffee chain will begin selling smoothies and Italian iced drinks this summer. The firm hopes the new offerings will bring in additional customers and get old ones to visit more often.
The company claims a method to it madness. According to The Wall Street Journal "Starbucks says they're the first stage of a broader push into healthier drink and food offerings."
A year-and-a-half ago, Starbucks founder and now CEO Howard Schultz sent a memo to his management saying that the chain was getting away from its quaint coffee store roots. He wanted customers to smell that fresh-brewed Java when they came though the door and see the merriment among the other customers who were so happy to be there.
Instead, now Starbucks sells dozens of drinks, food, music, DVDs, WiFi, coffee makers, and washer-drier sets.
Adding goofy new fruit drinks to the Starbucks menu will not do anything to bring in enough customers to offset declines. It is simply a portent that the chain has lost its way.
Douglas A. McIntyre
Fresh Del-Monte (FDP) came out with some pretty strong earnings today. Income climbed to $63.6 million, or $1 per share, compared with $51.6 million, or 89 cents per share a year ago. Much of the improvement was due to “higher banana selling prices: industrywide shortages due to bad weather in Central America.”
Most of those higher prices appear to have been passed along to retailers like Wal-Mart (WMT) and Kroger (KR). The quarterly numbers certainly don’t indicate that Del-Monte ate the increase.
But, was the reason for price increases the weather or was it Russian buyers moving into the market to import more fruit to their country? Four Russian companies including JFC and Sunway Group began aggressive bidding on bananas last fall. Between then and January the bid on a box of Ecuadorian bananas went from a range of $6 to $7 to a $13 to $14 range.
Much of the banana supply taken out of Ecuador by Dole and Del Monte is based on fixed annual contracts. Chiquita (CQB), on the other hand, buys in the spot market and ran into real trouble.
The weather must not have been all that bad. On April 21 there were news reports that banana exports out of Ecuador were rising. That usually works against higher prices. About the same time there was a report that the country’s growers were dumping bananas onto the market because of falling demand and a shortage of reefer capacity.
None of that prevented Chiquita’s president, Brian Kocher, from writing the company’s retail customers in February saying that flooding in Ecuador had cut down the company’s supply of bananas. Chiquita said it was applying the Force Majeure section of its contract and raising the price per box by $2.00. The flooding was an ‘act of God.” The Russian buyers must not have fallen under that rubric.
The Chiquita letter went on to mention weather problems in countries in the Caribbean which also export the fruit. However, the company did not mention that most of that supply has gone to Europe for many years.
There is certainly some evidence that the banana market was not in as much trouble as Chiquita was saying. It passed the $2 per box fee on to retailers like Wal-Mart and Kroger nonetheless. Since about 14 million boxes of bananas come into the US each month, the amount of cost being passed on to retailers or consumers is fairly large
.
Chiquita’s costs break down this way: pricing of 40 lb.box of bananas on the East Coast of $6.50 fruit on the boat price plus $4.80 surcharge plus $2.00 force majeure or approx. $13.30 per box. The letter from Mr. Kocher was worth a lot of money to Chiquita.
Dole sent out a similar letter at about the same time. It added a Force Majeure charge of $1.89. Del Monte’s Force Majeure price was $1.94.
It is clear from the Del Monte earnings that the company is making much more money than it did last year. As the cost of bananas went up, they passed that along to their retailers. But, the reasons given in their earnings release many not be the entire story.
It may have been Russians and not an “act of God” that pushed prices up. That extra $2 a box will be a nice bonus for earnings.
Yes, we have no bananas. We have no bananas today.
Douglas A. McIntyre
When we saw the Mars acquisition of William Wrigley Jr. Co. (NYSE: WWY) in perhaps the largest food merger, the first thing that came to mind besides "what a premium" was "What does this do for the valuation of Hershey Co. (NYSE: HSY)." JPMorgan (NYSE: JPM) and Goldman Sachs (NYSE: GS) are providing the lion share of the financing for Mars, and the Oracle of Omaha will provide about $6.5 Billion in financing. The market cap for Wrigley was $17 Billion before the buyout and about $22 Billion after.
Before this deal, Wrigley was almost 15% off of its 52-week lows, and the buyout premium has this one up almost another 25% higher. This was approximately 20-times EBITDA and about 32-times 2008 consensus EPS estimates.
Hershey on the other hand closed Friday at $34.74, only 3.5% ahead of $33.54 low over the last year. Hershey trades at about 19-times 2008 consensus EPS estimates. According to Capital IQ, Herhey's market cap is almost $7.9 Billion before any increase today and it notes that the EBITDA multiple is 9.8 based on the most recent data. Hershey was also only valued at half of the Wrigley market cap, so in theory financing would be easier to round up.
If all these comparisons are correct on an "on the fly" analysis, you could in theory say that the premiums could be 50% to 100% for Hershey. The problem is that Hershey has an earnings challenge and its stock was battered harder. Its raw material costs have escalated in recent years and its dependence on chocolate means its core ingredients are under the whims of some unstable regions in Africa. This would also not be much of a premium to the all-time highs. Lastly, it is believed by many that the Hershey family and descendants don't want to ever give up.
What do these stocks have in common other than stickling their products in your mouth? Founding families still in charge or in at least a dominant role. When you have founding families in control or when you have dual classes of stock, about the only mergers that work are friendly mergers where the money for them is just too much to say no to. They generally want to be included for the future in the new company too for posterity. The only hostile deals that work in these cases are the hostile deals that turn friendly, still reward the families beyond imagination, and keep them at least somewhat on for posterity.
After looking over all of this with a quick look, we won't say that Hershey is all of a sudden worth 50% more than it was Friday. In fact, it may not be worth significantly more than $40.00. But this Wrigley premium probably just raised the floor on Hershey for the time being.
Shares of Cadbury Schwepps plc (NYSE: CSG) are also indicated higher by 3% in pre-market trading. Hershey shares are indicated up about 5% pre-market.
You can join our open email distribution list to hear about previews for other mergers, spin-offs, break-ups, IPO's, and other special situations.
Jon C. Ogg
April 28, 2008
Jon Ogg produces and edits the Special Situation Investing Newsletter; he does not own securities in the companies he covers.
Hansen Natural Corporation (NASDAQ:HANS) has announced a new share buyback program for up to $200 million of its own common stock.
The Board of Directors has thus terminated the previous stock buyback plan that was authorized back in November 2005. Under that plan, the company had repurchased some $27.7 million of common stock. Hansen Natural noted that it had 93,440,891 shares of common stock outstanding.
Shares closed at $31.61 yesterday and its 52-week trading range is $30.77 to $68.40 and its market cap was $2.95 Billion. As of December 31, 2007 the company had some $75.5 million in cash and short-term equivalents (before $227 million 'long term') on its books.
If the company theoretically exercised the full amount and was able to get shares at yesterday's prices, then it would come out to 6.3 million shares of common stock or close to 3-days worth of average trading volume. As of mid-April, Hansen had 15.795 million shares listed in its short interest. That is the highest short interest seen in the stock in recent history.
You can join our open email distribution list to hear about other critical buybacks, restructurings, spin-offs, secondaries, and IPO's.
Jon C. Ogg
April 25, 2008
Triarc Companies, Inc. (NYSE: TRY) and Wendy's International, Inc. (NYSE: WEN) have signed a definitive merger agreement. According to the release, this has been approved by the
boards of directors of both companies.
The merger appears to be an all-stock buyout entitling Wendy's shareholders to receive a fixed ratio of 4.25 shares of Triarc Class A Common Stock for each share of Wendy's common stock they own. Before Triarc dilution, that looks like a price of $26.775 based on Wednesday's close.
We did just predict in our Special Situation Investing Newsletter (trials can now see that report) on Monday night that Wendy's would crater and either go proactive under Peltz's activism or that it would finally crater to a buyout. But we predicted that Peltz & Friends would have to come up with $30.00 per share in order to execute a friendly merger or at least one that isn't quite so hostile. While we are disappointed with this transaction, this is a stock for stock merger that does at least allow upside if the combined operations can reach the synergies, savings, and growth that it wants to achieve.
It does not appear that Trian Acquisition I Corp. (AMEX: TUX), the
Peltz SPAC, is part of this deal other than that the Trian Partners
sponsor will vote in favor of the merger along with Peltz and others
(who own roughly 35% of Triarc). That SPAC involvement may change if
this deal needs a
kick-up, but that is just for pondering rather than anything certain.
Continue reading "Wendy's Craters to Peltz, Triarc, Trian... Over The Barrel (WEN, TRY, TUX)" »
Bristol-Myers Squibb Company (NYSE: BMY) came out with earnings at $0.35 EPS and reaffirmed 2008 guidance of $1.36 to $1.46 GAAP EPS and $1.60 to $1.70 non-GAAP EPS. It also maintained a 2007 to 2010 CAGR of 15% for non-GAAP EPS. While this looks like a miss on the surface with First Call at $0.41 EPS, we are most concerned with the company's plan to partially spin-off one of its operations.
Bristol-Myers Squibb announced that it currently plans to file "by year-end" to sell approximately 10% and no more than 20% of its Mead Johnson Nutritionals unit to the public through an IPO. BMY will retain at least an 80% equity interest in Mead Johnson Nutritionals for the foreseeable future.
After "extensively considering strategic options," BMY management said that it believes this will allow Mead Johnson Nutritionals to implement its growth plans, increase shareholder value, and maintain its financial contribution to Bristol-Myers Squibb. Obviously, the execution of the partial spin-off is subject to many factors and uncertainties including business and market conditions.
In short, this is the new version of the tracking stock. So we wanted to see how the unit did and wanted to see how it compares to the full company. Worldwide Nutritional sales increased 16% (after a 5% favorable forex) to $703 million in Q1-2008. For a comparison on how this relates to entire BMY, the whole company generated $5.2 Billion in total sales.
U.S. Nutritional sales rose 5% to $288 million in Q1-2008, primarily due to increased sales of ENFAMIL. Its international nutritional sales rose 25% to $415 million (including 10% positive forex effect) in Q1-2008 due to growth in both infant formulas and children's nutritionals.
Bristol-Myers Squibb Co. has a $42 Billion market cap as of yesterday's close.
You can join our open email distribution list to hear about other IPO's, spin-offs, secondary offerings, restructurings, and other special situations.
Jon C. Ogg
April 24, 2008
Football stars and CEOs pride themselves on winning when the chips are down, when things look to be at their worst. Elias Sports Bureau and legions of demented math Ph.Ds keep statistics on how many games are won after the two minute warning in pressure-cookers that lesser men could not handle.
Howard Schultz, founder of Starbucks (SBUX) made two tremendous mistakes and then could not correct them in time to get his company back on track. Several quarters ago, he let the CEO who he later fired say that Starbucks was on its way to having 40,000 stores, more than double its locations then. That set the bar so high that Wall St. was not prepared to see it lowered.
In February of 2007, Schultz sent a memo to his management saying that Starbucks had lost its early panache. He should have known then that the fact he would have to pen such a document was a sign that the consumer market was already moving away from his company.
Schultz stepped back into the CEO job, far too late, a horrible misjudgment on his part. He had no choice other than to play catch-up. The Starbucks growth story was well along its way to falling apart. Most of what Schultz did was cosmetic. He closed his stores for three hours one day to "re-train" his workers. He said the stores would get new brewing machines, and he launched a new line of coffee. It was all "bull". Investors hoped it would help. Not a chance.
Yesterday, Starbucks announced that its quarter would be bad and lowered its guidance for the year. The stock dropped to about $15 after hours. It traded at $40 less than two years ago.
It is not that long ago that Sam Walton visited 300 Wal-Marts (WMT) a year. J Willard Marriott used to read all of the complaint letters that came to his hotels. Both men could see any trouble a long way off. Nothing had to be done last minute. They could sense signs of trouble early because they looked for them.
Schultz saw Starbucks best days coming to a close when he sent out his note fifteen months ago. But, he stayed in his office and did nothing. By the time he came back, it was too late. He had such a brief time to make things better, and he could not pull it off.
Douglas A McIntyre
After today’s close we saw earnings out of NutriSystem Inc. (NASDAQ: NTRI) with $0.42 EPS on $216.468 million in revenues. The estimates from First Call were $0.41 EPS on $214.52 million in revenues.
The company gave guidance of $180 to $190 million for the quarter ahead, with adjusted EBITDA of $36 to $40 million. Next quarter estimates are $0.60 EPS on $183.29 million in revenues. As far as fiscal-2008 guidance, the company put revenues at $700 to $720 million, with adjusted EBITDA of $125 to $135 million. Estimates for fiscal Dec-2008 are $2.23 EPS on $718.89 million in revenues.
Joseph Redling, President & COO, will succeed Michael J. Hagan as Chief Executive Officer, effective May 1, 2008; Hagan will stay on as non-executive Chairman.
The company also repurchased and retired 3.3 million shares, or approximately 10% of total outstanding shares for $44,557,000. NutriSystem also declared the its first quarterly dividend of $0.175 per share, payable May 15, 2008 to shareholders of record as of May 5, 2008; although this will be subject to determination each quarter ahead.
Shares closed up 3.2% at $21.13 in normal trading today, and shares are down modestly at $21.00 in after-hours trading. This CEO departure is keeping shares from running most likely.
We recently ran a large list of stocks that could double from their lows by the end of the recession, and NutriSystem was one of those stocks. This stock has one of the more crowded short sale trades out there with 19.23 million shares (60% of float) listed as being short. After a near 70% drop so far over the last 52-weeks, these numbers would otherwise be very acceptable.
Jon C. Ogg
April 23, 2008
Starbucks (SBUX) is now dead, just not buried.
The company warned on earnings for the quarter and the year. Howard Schultz's attempt at a turnaround never made it out the door. He was too late firing his old CEO and management and the company's tremendous growth and success slipped away from him. No matter how wealthy he is now, his shareholders have lost half the value of their stock in just over a year.
For the second fiscal quarter ended March 30, 2008, SBUX now expects revenue to increase 12 percent and earnings per share to be $0.15, compared with $0.19 per share for the same period a year ago. The language used to explain some of the short-fall cannot be found in the any dictionary available at local libraries in most cities. "Starbucks estimates that costs associated with the implementation of its transformation agenda, and charges related to the rationalization of its store portfolio, negatively impacted EPS by approximately $0.03 per share in its fiscal 2008 second quarter." The CFO and someone in PR actually approved that.
Starbucks now expects same-store sales in the US to be down "middle digits" for the quarter just ended. Because of weakness in the company's home market Starbucks now expects full-year fiscal 2008 EPS to be somewhat lower than the $0.87 reported in fiscal 2007.
How humiliating.
Douglas A. McIntyre
The food crisis got worse yesterday just as it seems to get worse as each week passes. CostCo (COST) is having to limit fulfilling huge orders for items like flour. According to Reuters "with global tensions over food supplies mounting, prices of world staples rice and corn surged on Tuesday amid strong demand and concerns over slow planting of the new U.S. corn crop."
Not only is the problem of rising food costs increasing inflation; it is cutting away at the world's ability to feed the poor.
At recent G-7 finance minister meetings and the IMF gathering, food prices were identified, by many measures, as being a larger issue for the global economy than the credit crisis which is doing so much damage to financial market liquidity.
According to The Wall Street Journal "Surging commodity prices have pushed up global food prices 83% in the past three years -- putting huge stress on some of the world's poorest nations." Food inflation rates in China are nearly 20%.
Feeding the starving sits way higher on the set of priorities for food supply than inflation does, but solving the two problems is related in almost all ways, and, it defies resolution in almost every way.
There are, at least, possible solutions to the rising price of oil. OPEC may see that its actions are gutting the GDP growth of many nations and decide that its is their own best interest not to see the global financial ecosystem come apart at the seams. The US could let out some of the petrol in the strategic oil reserves. The action, by itself, might push down speculation in oil and bring crude down by several dollars.
The credit issues plaguing banks and seizing up the capital markets has the potential, at least, of being resolved over the next year by central banks pumping money into the system.
Food supply and demand has no central system for driving a resolution, no central banks or oil cartel.
Many of the world's leaders believe the US is at fault for much of the food shortage. They reason that selling crops for biofuels is a profitable but cruel use of a commodity which is in short supply. There is some truth in the finger pointing, but it is not the whole truth.
Crop yields in large agricultural economies like the US, Canada, and Russia is at an all-time peak, Better land management, fertilizer, and seed have seen to that. But, the sad fact is that the number of the world's poor and under-nourished grows with the global population increase and war pushes more and more people off of producing land and into huge refuge camps which grow no crops by have an unusually immediate need for food.
With food production worldwide running at levels which are unlikely to rise and the number of people who need food for survival moving up, there is no ready solution to bringing down the inflation rate of agricultural commodities.
Unless and until the central banks are willing to underwrite the cost of food by purchasing commodities and selling them below market nothing will happen. They have taken bad paper from banks in exchange for good cash. Some counties, like China, already underwrite the cost of fuel to keep their economies growing.
Bring down food prices involves buying up the fruits of the global farming system and "loaning" it to many of the world's nations. But, who has a check-book that large?
Douglas A. McIntyre
Shoppers are raiding CostCo (COST) for rice and wheat. At least the are paying for it, for the time being anyway.
The discount retailers CEO says that "enough is enough". CostCo is prepared to ration the commodities so that the chain does not come up short in a real emergency. James Sinegal, Costco's chief executive officer, told Reuters, If a customer came in and said, "I want 10 pallets of flour, we'd probably say, 'No, we can't give you that. We can give you one pallet'."
With the price of some food up by three times over the last year perhaps customers only want to get a little bit ahead of the curve. Those are the same shoppers who are building bomb shelters.
Douglas A. McIntyre
There are many restaurants reporting earnings this week, some who have suffered from economic sensitivity and some who have not. People do have to eat when times are good and when times are tough, but many restaurants would be victims due to pricing and other factors. This week we have many key earnings from retail food chains such as McDonalds Corp. (NYSE: MCD), Brinker International Inc. (NYSE: EAT), Yum! Brands Inc. (NYSE: YUM), Chipotle Mexican Grill, Inc. (NYSE: CMG), PF Chang's China Bistro Inc. (NASDAQ: PFCB), and Wendy's International Inc. (NYSE: WEN).
Tuesday we’ll get to see earnings out of McDonald's Corp. (NYSE: MCD). The estimates for the restaurant chain from First Call are $0.70 EPS on $5.4 billion in revenues. Next quarter estimates are $0.81 EPS on $5.77 billion in revenues. Estimates for fiscal Dec-2008 are $3.21 EPS on $23.16 billion in revenues. Analysts have an average price target north of $62.00, and McDonald’s 52-week trading range is $46.64 to $63.69. Shares closed Monday up 0.6% at $58.67.
Tuesday we’ll get to see earnings out of Brinker International Inc. (NYSE: EAT). The estimates for the restaurant chain from First Call are $0.32 EPS on $895.62 million in revenues. Next quarter estimates are $0.43 EPS on $922.21 million in revenues. Estimates for fiscal June-2008 are $1.40 EPS on $3.57 billion in revenues. Estimates for fiscal June-2009 are $1.64 EPS on $3.65 billion in revenues. Analysts have an average price target north of $20.00, and Brinker International’s 52-week trading range is $14.65 to $34.33. This stock was on our list of top stocks that may double from the lows by the end of the recession. Shares closed Monday up 2.6% at $19.60.
Continue reading "Key Food Chains Ready For Earnings (MCD, EAT, YUM, CMG, PCFB, WEN)" »
An SEC Filing this morning shows activists are going to go after Wendy's International Inc. (NYSE: WEN) with a little more publicity than mere private letters. Trian Fund Management, L.P., Triarc Companies, Inc. (NYSE: TRY) Peter May, Nelson Peltz, Thomas Sandell, and others are in an activist group that have sent a letter to Wendy's International, Inc. (NYSE: WEN).
Trian appears to be the lead in the group as far as signing the letter, and the letter says it is very concerned about the current direction of Wendy's. Trian and Triarc were informed that the Wendy's special committee had rejected two acquisition proposals made by Trian and Triarc, which had called for the combination of Wendy's and Arby's and the other involved an acquisition of 100% of Wendy's for over $900 million in cash with the balance in stock.
These proposals would have required the approval of the shareholders on each side of the transaction and neither of the proposals was conditioned on the receipt of third party financing. The letter notes that the most recent proposals were summarily rejected in less than 24 hours.
Before any transaction is considered, shareholders should be fully updated on the current financial condition of the company, including sales, profits and margins. The activist group also expects that the company will not take any action prior to the earnings announcement on April 25.
Trian wants shareholders to determine the future of Wendy's and it intends to contact other shareholders to call a special meeting to give shareholders the opportunity to vote on the future direction of Wendy's.
This is looking like it is a very unique special situation. The problem is that the value has been previously hard to see in Wendy's and it would not have been exactly cheap for an acquirer. But this pullback down to the mid-$20's may actually change this now that its ratios have come in-line or under many of the peers.
We checked Capital IQ's database and the company isn't an easy one to push around, although it isn't exactly one that can lock the doors and pray for the best while the world burns. It requires a 67% vote by the board to approve any transaction, and 75% of shareholders are need to approve any transaction without board approval. The board is considered a classified board, and it does have cumulative voting for board seats. Its 15 member board also has 3-year terms. The provisions do allow for shareholders to act by written consent, so this letter at least has to be acknowledged. Capital IQ also notes that Wendy's does have an active poison pill. Lastly, Ohio is that the state of incorporation, and that state is one of the harder ones for hostile mergers or actions against public companies incorporated there.
You can join our open email distribution list to hear about other activist situations, IPO's, back door plays into IPO's, spin-offs. break-ups, and other special situations we frequently preview. We have reviewed this one in months past for the Special Situations newsletter, but the valuations at the time appeared to be a serious obstacle. Now that it has come in, it looks like it may be time to dust off those notes and see if the relative value is there.
Wendy's shares were basically unchanged pre-market after closing at $25.10 yesterday, but shares are now up almost 1% at $25.34 right after the open. The 52-week trading range is $22.18 to $42.22. Its current market cap is just shy of $2.2 Billion.
Jon C. Ogg
April 18, 2008
Jon Ogg is a producer and editor of the Special Situation newsletter and the "10 S
