Arby's Pulls Down Wendy's Pants

We moaned and groaned about the buyout of Wendy's by Triarc's Arby's in the past. It was a self-serving deal to begin with, assuming the average shareholder is not part of Nelson Peltz's Id*. Shareholders have suffered. The next time some billionaire or high powered private equity firm comes your way talking about synergies and enhancing value, take it with the seriousness it deserves... very little.  There will be more destruction than creative destruction.

You cannot meld a struggling firm (Arby's) to a misguided but better franchise (Wendy's) and hope to create some magic mountain of junk food delight, with a combined stock hitting grand heights. 

Thus, with earnings released, we see Arbys a drag on Wendy's, as we knew it would be:

In North America, system wide same-store sales were up 1% while Arby's fell 8.7%, although that key metric was down only 2.5% in March following the launch of its new "Roastburger" sandwiches. 

Meanwhile, margins at company-operated Wendy's restaurants for the quarter tweaked up to 11.1% from 10.1% a year ago, reflecting reduced labor and other costs. Arby's margins, though, fell to 14.2% from 17.1% in the year-ago period, "due primarily to sales deleverage," the company said.

(Marketwatch)

Peltz will no doubt blame the times we are in, while ignoring the basic fact that Arby's had nothing to offer Wendy's, except a spare apostrophe. Cost synergies are no stand in for good management. 

*Wiki: The id is responsible for our basic drives such as food, water, sex, and basic impulses. It is amoral and egocentric, ruled by the pleasure–pain principle; it is without a sense of time, completely illogical, primarily sexual, infantile in its emotional development, and will not take "no" for an answer. It is regarded as the reservoir of the libido or "instinctive drive to create".