bloggingbuyouts

When you look at the work of 13-D wielding activist investors, you usually find the following demands repeating themselves over and over:

• Try to sell the company to a private equity firm or strategic buyer.
• Buy back stock and/or pay a dividend.
• Get rid of the current management and/or board of directors.

The frequency of these requests has given many activists a reputation -- in my opinion largely undeserved -- as short-term oriented paper shufflers looking to pump up the stock price and move on.

Then there's Nelson Peltz, who focuses on that governance-oriented stuff too but is also unique in that he makes very specific comments about marketing: Wendy's isn't playing up its freshness in its advertising, Heinz's ketchup packets weren't good, Tiffany's was too focused on gifts, etc. This fascinating piece in Fortune looks at the investment methodology of this restaurant and branding expert.

Unfortunately, Mr. Peltz's publicly-traded company, Triarc (NYSE: TRY), has been a poor performer of late. But if you're sold on his ideas, it just might be a good time to take a look.

Shares of Starbucks (NASDAQ: SBUX) were up more than 6% on Friday after Nelson Peltz disclosed a stake of less than 1% in the company.

The Wall Street Journal reports that "John Glass, an analyst at Morgan Stanley, said Mr. Peltz could urge Starbucks to cut spending and use more licensing or franchising in opening locations. The money saved from that could go to buying back shares or a larger dividend for shareholders."

Perhaps. He very well could urge Starbucks to do that -- but take a quick look at the chart for the company that Mr. Peltz is chairman of -- Triarc (NYSE: TRY). The stock closed at $6.69 on Friday, after beginning 2007 at more than $20 per share. And how's the corporate governance over there? One company that engaged in a proxy fight with him blasted him with this:

Triarc received a corporate governance rating of 21.5, exceeding only 21.5% of all companies in the S&P SmallCap 600 and ranking it in the bottom quartile. Separately, Corporate Library gave Triarc an 'F' on overall board effectiveness -- the lowest possible rating.

Most likely Peltz's stake is a nonissue and will lead to no changes. I certainly don't buy that it's a good reason for the stock to add more than half a billion dollars to its market cap in a single day.

Nelson Peltz isn't too happy with Wendy's (NYSE: WEN), which quickly rejected two of his bids for the company, including a plan to combine Wendy's with Arby's, a fast-food chain owned by Triarc (NYSE: TRY), a company chaired by Mr. Peltz.

Normally I'm pretty sympathetic to the campaigns of activist investors but Peltz has a pretty poor record on corporate governance. During his proxy fight with Heinz back in 2006, the company responded to his calls for change with this: "Triarc received a corporate governance rating of 21.5, exceeding only 21.5% of all companies in the S&P SmallCap 600 and ranking it in the bottom quartile. Separately, Corporate Library gave Triarc an "F" on overall board effectiveness – the lowest possible rating."

So it appears that Peltz may not be walking corporate governance talk. But then again, Wendy's has also been a prodigious destroyer of shareholder value of late, so this is kind of like trying to decide between leaving the kids with Britney or K-Fed.

With economic worries sending luxury goods makers like Coach Inc. (NYSE: COH) and Tiffany & Co. (NYSE: TIF) well off their highs, at least one super-investor who isn't afraid to go against the conventional wisdom is taking notice.

Nelson Peltz and his Trian funds have upped their stake in Tiffany from 5.6% to 7.9% amid continued weakness in the company's share price -- the stock is already down 20% year to date.

According to the Wall Street Journal [subscription], Peltz has previously said he isn't seeking a seat on the company's board, but wouldn't rule out the possibility of taking an activist stance somewhere down the road. Another big drop could prod him to step in and try to make something happen.

Tiffany recently reported a weak holiday sales period, a strong indication that the economic malaise that started in subprime may be carrying over to more upscale consumers. In recent years, Tiffany's and other luxury goods makers have seen their markets expand to include more luxury aspirational customers. Dependence on less wealthy consumers for sales growth may be making the luxury goods sector less immune to economic woes than it has been historically.

Nelson Peltz's Triarc has acquired a 14% stake in Cheesecake Factory (NASDAQ: CAKE), sending shares of the dining chain up 10% on Wednesday.

The company said that it "has had a preliminary conversation with Triarc already, and looks forward to continuing that dialogue."

According to the The Wall Street Journal [subscription], "Mr. Peltz has bought stakes in several other restaurant and food companies, including Wendy's International Inc.(NYSE: WEN) and H.J. Heinz Co (NYSE: HNZ). At those companies, he has pressed directors and executives to sell brands, increase marketing or otherwise change their strategies in an effort to raise their stock prices. Mr. Peltz has said he prefers to work with existing management to effect change, though in the past his involvement has prompted reshuffling of company management and boards."

Cheesecake Factory has struggled to provide investors with strong returns over the past few years, and was scraping a multi-year low before the Petlz announcement sent the stock up. As recently as January, there were rumors that Cheesecake Factory would be taken private at a big premium. At the time, I wrote that "If the Cheesecake Factory Inc. is taken private at a substantial premium to its current market cap of $2.1 billion, it will be looked at as a symbol of LBO-madness in the years to come."

Since then, Mr. Market has lopped $400 million off the stock's market value as the company has been unable to duplicate the strong growth it once enjoyed. But Cheesecake Factory still has a very strong brand an exceptionally good numbers -- and with 125 or so restaurants in operation, there could be ample room for growth.

It might be time for bargain hunters to look anew at this once-hot growth darling.

Chalk up another victim of the evaporation of cheap credit. Yesterday Nelson Pelz's Triarc Co., the front runner in the race to buy Wendy's International (NYSE: WEN), announced it had offered $37-$41 per share, well below the price it was prepared to pay last summer when its interest was first revealed.

Another factor suppressing the price is word in The Wall Street Journal (subscription required) earlier this week that another suitor, William Foley, along with several investment funds, had decided to pass on the opportunity. This leaves only one known competitor for the company, David Karam's Cedar Enterprises, which owns 134 Wendy's restaurants.

Apparently, Pelz was not enthralled by the company's slightly better than expected third quarter, or perhaps he took to heart Wendy's CEO Kerrii Anderson's concern that the "headwinds" of rising commodity prices could hamper the company's ongoing cost reduction initiative.

After a burst of market enthusiasm over the sale possibility drove Wendy's stock as high as 42.22 this summer, it has dropped again to the doldrums of the low $30's. It fell further on today's news.

Billionaire Nelson Peltz may have thought he had the inside track to buy Wendy's (NYSE: WEN), since his Triarc Group already owns Arby's.

According to The Wall Street Journal, Mr. Peltz will have competition from a group including Thomas H. Lee Partners LP, Oaktree Capital, and First National Financial. The head of First National once ran the Carl's Jr. and Hardee's chains. And a third group has come to the table, this one backed by Kelso & Co. and Oak Hill Capital Partners.

Unlike several private equity deals that are falling apart because of tight credit markets, the Wendy's deal looks like it may be done at a nice premium for shareholders. Wall Street anticipates that the company could go for $37 to $41 a share. Wendy's stock is under $34.

Why is this deal different from others? Perhaps because the most visible bidders have a great deal of experience in the fast food business. This may give them more confidence that they will know which parts of the company can be improved to yield better cash flow.

That makes Wendy's shareholders more fortunate than those in other companies being pursued for buyouts.

Douglas A. McIntyre is a partner at 24/7 Wall St.

On tonight's MAD MONEY on CNBC, Jim Cramer has gone out with an activist investor pick on Kraft Foods (NYSE: KFT). He said he has been negative on the stock for too long. Cramer also noted that professionals are piggy-backing off of top activist investors Peltz and Icahn, so there is no reason you can't too. This is a situation that he hopes the CEO will actually embrace the activist holders, but thinks you can make money off this either way now that shares have pulled back since it came public that Icahn and Peltz are both shareholders. A divestiture or other action was noted as the would-be the method of unlocking value.

If you like Cramer or can't stand him, you need to keep in mind that these are not risk free trades. When you chase activist investors it is always important to recall that they have their own agenda in the quest to make money. You can make money following these investors, so long as you don't hang around too long and don't chase a situation where an activist actually hurts a company. If an activist investor has decided to take their money out you can make the assumption that the easy money has been made or that the activist wasn't active enough. It is also quite frequent that activists are merely short-term investors trying to force more leverage to squeeze out quick profits from the shares. That means that they can often be viewed as corporate raiders that don't have the liquidity to make a full acquisition and enable a turnaround themselves.

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.