On The Money: Border Crossing
Wendy’s shed Tim Horton’s amid reams of paperwork.
By David Farkas, Senior Editor -- Chain Leader, 12/1/2006
On March 24 Oakville, Ontario-based Tim Horton’s, then a subsidiary of Wendy’s International, enjoyed one of the most popular initial public offerings in years. The eagerly awaited event raised about $726 million on the sale of 33 million shares, with the stock price jumping 30 percent on the first day of trading. Washington, D.C., attorney Steven Patterson of Arkin Gump Strauss Hauer & Feld, who coordinated the complicated cross-border deal, explains the details.
How was this deal different from other restaurant carve-outs? Why is it still of interest?
It was a unique spinoff because it was a cross-border transaction that involved dual listing on the [New York Stock Exchange] and Toronto Stock Exchange. That made it unusual. Lots of restaurant companies operate divisions in other countries. But not many own something as significant as Wendy’s and Tim Horton’s. Horton’s is an iconic brand in Canada.
What role did you play in arranging the transition from subsidiary to public entity?
Our role was as primary counsel. We helped coordinate all aspects of the transaction: filing of the registration statement and the application of securities. Most Canadian securities requirements piggy-back off U.S. requirements. A separate disclosure document had to be prepared, however. The Canadian document was translated into French. That was part of the uniqueness of the deal.
How were Wendy’s executives involved in this process?
The executives furnished the strategic and financial reasons for the transaction. It’s not a deal that happens in the background. They are fully engaged.
Did the company anticipate the noteholders’ lawsuit alleging they’d be hurt financially by the spinoff?
That’s not something I can comment on.
Let me ask the question this way: Can companies anticipate such lawsuits?
In any transaction like this, if the IPO occurs, it is because the board of directors concludes it’s in the best interest of shareholders. It’s one of the things the board and management puts at the top of the list. Outside counsel would be asked if there were any reason to think the company might be sued.
Has the court ruled on this case?
There’s been a court ruling on the case on the temporary-restraining-order level. It’s not a resolved matter.
You mentioned cross-border coordination. Can you provide some color as to complications that popped up?
That’s one of the teachings of this deal: the importance of coordinating Canadian counsel, accountants and financial advisers. Everyone is trying to get everyone up to speed.
What lessons can restaurant executives draw from this IPO?
One is the importance of thinking well ahead of time of how a subsidiary should operate as a separate company. How the parent and subsidiary depend on each other are probably in most cases pretty complex. So it’s important for management and counsel to review together administrative and operational relationships.
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