The Columbus Dispatch – Proposed purchase of Buffalo Wild Wings by parent of Arby’s has implications for Wendy’s

The value of Wendy’s stake in Arby’s may rocket higher thanks to the latter’s parent’s acquisition of Buffalo Wild Wings.

Arby’s owner, Roark Capital, plans to buy Buffalo Wild Wings for $2.4 billion and fold the chicken wing restaurant company under Arby’s management.

Wendy’s owns an 18.5 percent stake in Arby’s, a relic of when Wendy’s merged with Arby’s before Arby’s was sold to Roark in 2011. Wendy’s stake in Arby’s was valued at $325.8 million as of Oct. 1, according to a filing with the U.S. Securities and Exchange Commission.

How much that investment grows with the purchase of Buffalo Wild Wings is unknown, but Wendy’s approves of the purchase.

“Given our investment position in Arby’s, we are supportive of the proposed transaction,” Wendy’s said in a statement. “As has been our practice, we will provide periodic updates on the value of our ownership stake during our regular financial reporting.”

Wendy’s added that it is too early to know what impact the deal will have on the value of its investment in Arby’s.

One analyst, Chris O’Cull of Stifel, said in a research note that if Arby’s plan to merge with Buffalo Wild Wings goes through, Wendy’s stake in the new entity will likely increase in value, but the exact amount is unknown. When Arby’s was sold to Roark in 2011, Wendy’s 18.5 percent stake was worth about $30 million.

Arby’s fortunes have soared since splitting with Wendy’s. Roark paid Wendy’s a special dividend of $54.5 million in 2015 after a particularly good quarter.

It isn’t well understood, though, just how Buffalo Wild Wings and Arby’s will be consolidated.

Roark is a private-equity firm, which doesn’t make financial disclosures. Arby’s and Buffalo Wild Wings will share a CEO, which makes it look like Arby’s might just swallow the wings chain whole, according to John Gordon, principal of Pacific Management Consulting Group, and a restaurant industry analyst.

“This would imply Arby’s would get the value upside, and thus, Wendy’s,” Gordon said.

Roark said in announcing the deal that Buffalo Wild Wings will operate as an independent brand. Roark also owns Hardees, which is a separate investment from Arby’s.

Gordon thinks more will come out next year as the deal is finalized and Wendy’s divulges the value of its stake in Arby’s. The deal is expected to close during the first few months of 2018. It still needs the approval of Buffalo Wild Wings’ shareholders. If the value rises a lot, investors will want to know what Wendy’s plans are for their stake, he said.

“When and why would they sell it?” Gordon said.

Information from the Associated Press was included in this story.