Wendy's to keep a small stake in Arby's after breakup

NEW YORK — The marriage of square burgers and roast beef sandwiches is about to end. Wendy's/Arby's Group said Monday it will sell a majority stake in its struggling Arby's brand to Roark Capital Group, an Atlanta private equity firm.

The move marks the end of a short-lived union between the two fast-food chains and represents a role reversal. Arby's started as the suitor in the relationship and ended up on the chopping block.

Roark, which already owns Moe's Southwest Grill, Cinnabon and other restaurants, will pay $130 million in cash for an 81.5 percent stake in Arby's. It also will assume $190 million worth of Arby's debt.

Together, Wendy's and Arby's make the No. 2 chain restaurant by U.S. revenue, behind McDonald's, according to Technomic, a food industry research firm. Counted separately, Wendy's falls behind Subway, Starbucks and Burger King to No. 5. Arby's is No. 16.

Wendy's/Arby's Group Chief Executive Officer Roland Smith said the chain entertained offers from "quite a number" of bidders, but he declined to give details. He said the company's decision to keep an 18.5 percent stake in Arby's should signal its confidence in Arby's future.

The company tallied the value of the deal at $430 million, including the cash payment, the assumed debt, the tax benefit and the 18.5 percent stake, worth around $30 million.

Wendy's and Arby's came together when billionaire investor Nelson Peltz and his investment firm, which already owned Arby's, agreed to scoop up Wendy's.

Wendy's/Arby's Group let its two brands remain distinct after the merger, with Wendy's focusing on salads, baked potatoes and Frostys, and Arby's hawking roast beef sandwiches, curly fries and Jamocha shakes.

The combined company has struggled since its formation in the depths of the recession, losing money in seven of its 10 quarters. In January, it said it would consider selling Arby's to focus on Wendy's, which it hopes to expand by launching breakfast in more locations and by opening more restaurants overseas.

Wendy's has almost twice as many restaurants — 6,600 to Arby's 3,600 — and produces about 70 percent of the company's revenue.