Wendy's... Going... Going...

When you're a public company, you loose control.

What would Dave Thomas say about this?

Arby's owner buying Wendy's for $2.34 billion stock deal

After at least two rejections, billionaire Nelson Peltz has finally succeeded in landing Wendy's in a $2.3 billion deal that would add the chain known for its square burger and chocolate Frosty dessert to his ownership of Arby's and its roast beef sandwiches.

Now, the investor known for agitating corporations to boost their stock price has to figure out how to make both profitable while the economy slumps and more Americans are saving money on food and fuel by staying home to eat.

Atlanta-based Triarc Companies Inc., owned by Peltz, said Thursday it will pay about $2.34 billion in an all-stock deal for the nation's third-largest hamburger chain started in 1969 by Dave Thomas. Wendy's had rejected at least two buyout offers from Triarc.

Thomas' daughter Pam Thomas Farber said the family was devastated by the news.

"It's a very sad day for Wendy's, and our family. We just didn't think this would be the outcome," said Farber, 53.

If her father were alive to hear news of the buyout, "he would not be amused," she said.

Peltz has pushed for change at Wendy's — including the spinoff of the Tim Hortons coffee-and-doughnut chain and cutting corporate expenses — since 2005 to increase the company's stock price. His Trian Fund and his allies own 9.8 percent of Wendy's stock.

It's a similar tactic Peltz has used at other companies where Trian has become a significant investor, such as Cadbury Schweppes PLC and H.J. Heinz Co. Trian also owns shares of Tiffany & Co. and the Cheesecake Factory Inc., according to regulatory filings.

Sales at company-owned stores opened at least a year, considered a key indicator of a retailer's strength, fell 1.6 percent in the quarter and 0.1 percent at U.S. franchise restaurants.

Wendy's also has failed to connect with consumers in several advertising campaigns that have been tried since Thomas' death in 2002 and it has limited success in adding new products and with its breakfast menu. Thomas, always wearing a white short-sleeved shirt and red tie, became a household face when he began pitching his burgers and fries in television commercials in 1989.

"It's a company that's sort of lost its way," said Bob Goldin, executive vice president of Technomic Inc. in Chicago.

Triarc said it will also change its name to include the Wendy's name.

Wendy's deferred comment to Triac, which had nothing further to say right away.

Several lunchtime customers at a Wendy's in Columbus wondered how Thomas would have reacted to the news, were he still alive.

"I think he's probably rolling over in his grave right now," said John Knape, 36. "But it's business, and that's what you need to do to survive, right?"

The deal caps two chaotic years for Wendy's in which it has sold or spun off operations, slashed its corporate staff and had its wholesome image tarnished by a woman who falsely claimed she found part of a finger in her chili.

Farber said the family didn't think much of Peltz' and Triarc's tactics.

"They came after them (Wendy's) and came after them and came after them. They spun Tim Hortons off, they did this, they did that. They did everything they asked but it wasn't enough."

Thomas opened his first restaurant in a former steakhouse on a cold, snowy Saturday in downtown Columbus on Nov. 15, 1969. He named the chain after his 8-year-old daughter Melinda Lou — nicknamed Wendy by her siblings.

Wendy's, based in suburban Dublin, operates about 6,600 restaurants in the United States and abroad. It trails McDonald's and Burger King Holdings Inc. in the burger business.

The Icahn Lift

60 Minutes recently had an interesting segment about Carl Icahn... and about how you can profit when he decides to buy a company's stock.

It's called "The Icahn Lift"...

See how he does it... and why it works...

Check it out!

Secrets Behind Return on Investment

Evaluating a project based on Return on Investment alone?

Thanks to Kim Kerr for forwarding the following link... for YOUR consideration!

The ROI Users Survival Guide

or read the new book The Business Case Guide.

Are Auditors Worth It?

Auditing is an expensive proposition for public companies.

Sure, it's a task that must be done, but are auditors really worth the fees they charge?

The New York Times has an interesting article about this.

Draw your own conclusions after reading these excerpts...

ALTHOUGH he had been with the mortgage lender New Century Financial for only two months, Tajvinder S. Bindra had spent a good part of late 2006 and early 2007 pelting the company’s controller and a member of its auditing firm, KPMG, with questions about the company’s accounting.

Frustrated by their responses and staring down a deadline to close New Century’s year-end books, Mr. Bindra, the company’s chief financial officer, told both men that he needed written assurances from KPMG that New Century’s bookkeeping was proper, according to accounts of the discussions.

But KPMG balked. A few weeks later, on Jan. 31, 2007, KPMG and New Century’s own accountants stunned the company’s board by revealing that the lender had incorrectly calculated its reserves for troubled home loans. That mistake was likely to cost New Century $300 million, wiping out all of its profits from the second half of 2006.

Two months later, New Century, one of the largest subprime mortgage lenders in the country, would be bankrupt.

In March, Xerox and KPMG settled a securities lawsuit relating to decade-old accusations of accounting manipulations. And KPMG has been criticized for its audit of the Federal National Mortgage Association, after it was revealed that the company, known as Fannie Mae, had overstated its earnings by billions of dollars over several years.

And, finally, nearly three years ago, federal prosecutors came within an eyelash of filing criminal charges against KPMG over dubious tax shelters it set up for clients, leading to a deferred prosecution agreement and a wrenching internal investigation.

“For KPMG, this comes on the heels of all of the tax-shelter stuff, and they just got rid of having a court-appointed examiner, so this is difficult for them,” said Jack Ciesielski, editor of The Analyst’s Accounting Observer, a trade publication.

AMONG the “Big Four” auditing firms, KPMG is the smallest. Yet it is the go-to auditor for banking and financial services firms and real-estate investment trusts like New Century, according to Audit Analytics, an independent research firm. Deloitte & Touche and Ernst & Young also have many financial services clients.

KPMG is the auditor for such prominent mortgage players as Wells Fargo, Citigroup, HSBC Finance, Countrywide Financial and Thornburg Mortgage, according to an examination of annual reports.

Those relationships put KPMG in a potentially vulnerable spot as authorities increased their scrutiny of the subprime business. The Federal Bureau of Investigation has said it has 17 continuing investigations of possible corporate and accounting fraud related to subprime lending. That number, the F.B.I has said, is likely to increase.

“The Justice Department learned from its prosecution of Arthur Andersen that threatening entire firms jeopardizes our system of private auditing,” said Lawrence A. Cunningham, a professor at the George Washington University Law School. “What’s vital is that individuals be held responsible for wrongdoing.”

A MORE likely threat to auditing firms and mortgage companies could be civil, rather than criminal, lawsuits. Shareholders have already filed a raft of lawsuits against lenders that failed or whose stocks have dropped sharply. In some cases, shareholders are trying to add the auditors as defendants.

In January, New York City and New York State pension funds that are leading a class-action lawsuit against Countrywide added its auditors, KPMG and Grant Thornton, as defendants. KPMG declined to comment on the suit. A spokesman for Grant Thornton said the firm was confident it would be dropped from the suit because it had not audited Countrywide for four years.

Last week, liquidators of two hedge funds run by Bear Stearns sued the bank and its auditor, Deloitte & Touche. They contend that the firms hid the true financial risks and health of the funds, which invested in mortgage-linked securities. Bear Stearns declined to comment, and, in a statement, Deloitte said that the suit was without merit and that the firm intended to defend itself.

It is unclear whether the creditors in the New Century bankruptcy will try to recoup losses from KPMG. Even the court examiner, Mr. Missal, notes in his report that creditors of New Century could pursue negligence claims against KPMG but that such a case could be hard to win.

Even if KPMG is safe from large damages and a criminal prosecution, Lynn E. Turner, a former chief accountant at the S.E.C., said the findings were still troubling.

“The examiner cites different pieces of evidence that do raise concerns about whether or not you had an honest-to-goodness independent audit going on,” Mr. Turner said.

For its part, KPMG says that it faithfully carried out its professional duties.

“It is very easy — and totally unreasonable — to look at decisions made in 2005 or 2006 through a 2008 lens,” said Ms. Fitzgerald, the KPMG spokeswoman. “The full record shows that KPMG acted in accordance with professional standards. We will vigorously defend our audit work in the appropriate forum, which will allow for a complete hearing of the facts.”