Arby's Gets the Red-Headed Girl

She was playing hard to get last week, but Wendy's (NYSE: WEN) ultimately couldn't resist Triarc's (NYSE: TRY) charms.

The country's third-largest burger chain behind McDonald's (NYSE: MCD) and Burger King (NYSE: BKC) is hooking up with the parent company of Arby's in a deal that will create a fast-food empire ringing up $12.5 billion in system sales annually.

It's clearly not the buyout that Wendy's had hoped for. Just last week, the burger chain whined about a pair of buyout offers presented by Triarc as being too low to stomach.

Apparently, a closer look at the mirror finds Wendy's realizing that gravity hasn't been kind to her since she put herself on the bidding block last summer. The chain is accepting the all-stock deal as of Thursday morning, giving investors 4.25 shares of Triarc for every share they own. The offer represented a mere 6% premium to Wendy's shares, and a sharp discount to last year's highs. The small premium became even smaller when Triarc's stock opened lower on the news.

If you're wondering what Wendy's saw in its own reflection, maybe the company's horrible first-quarter numbers can shed some light on its resignation. The company was set to report earnings Friday, but figured it would push it through today on the heels of the buyout announcement.

It was definitely not a quarter to remember for Wendy's. Earnings fell to $0.05 a share from $0.15 a share. Back out restructuring and suitor-sniffing expenses, and profits still would have clocked in lower at $0.10 a share. Revenue dropped as same-store sales at company-owned units fell by 1.6%. There are fewer locations open today than there were a year ago.

In a nutshell, investors aren't going to like this exit strategy, but the company's lackluster performance wasn't going to smoke out higher bids in the near term. Wendy's has been seeking "strategic alternatives" for a year, and Triarc is the only one that has been vocal about winning Wendy's hand. Bidding wars are so easy when you're the only gentleman caller waiting on the front porch.

Who else was going to step up? IHOP's (NYSE: IHP) burps still smell like Applebee's, and smaller burger flippers like CKE Restaurants (NYSE: CKE) and Steak n Shake (NYSE: SNS) lack the leveraging muscle. Don't look at the big boys, because McDonald's has spent the past couple of years spinning off concepts, while Burger King is in too good a groove to jinx it with a costly acquisition. Private equity? I like your thinking, but lenders are as leery of new commitments as Wendy's patrons were after the chili finger episode. 

So the market may not have much of a choice beyond warming up to the marriage of Wendy's with Arby's. The way things seemed to be going for the burger chain, it's a better future than living alone.