WENDY'S GETTING FRESH NO. 3 CHAIN FOR BURGERS BUYS BAJA.

Byline: Evan Pondel Staff Writer

THOUSAND OAKS - Wendy's International Inc. spent $275 million Friday on the trendy burritos of Baja Fresh Mexican Grill in a bid to better position itself against its larger burger rivals.

The cash deal comes within weeks of Baja's planned public offering, in which underwriters and employees were awaiting stock options after the company hit the market. But the offer from Wendy's, the No. 3 hamburger chain, to buy 169 owned or franchised Baja restaurants was too good to pass up, company leaders said Friday.

``We have been actively pursuing concepts in the rapidly growing, fast- casual restaurant segment, and Baja Fresh is clearly the best in the Mexican category,'' Jack Schuessler, Wendy's chairman and chief executive, said in announcing the deal.

It's the second time the 33-year-old Dublin, Ohio-based chain has pursued a company that is dramatically different from its square-patties-burgers base. Wendy's acquired Tim Hortons Canadian doughnut and coffee shop chain in 1995. Now, with burritos under their umbrella, Wendy's is diversifying its menu in the same way No 1. McDonald's Corp. has, said Paul Westra, analyst with Robertson Stephens in San Francisco.

Westra, who eats a Burrito Ultimo at Baja three times a week, applauds Wendy's appetite. He said the company seized a perfect opportunity to broaden its breadth, without over-cooking its cash reserves. The purchase pits Wendy's directly against rival McDonald's, which owns the Chipotle Mexican Grill chain.

Since Baja Fresh's inception more than a decade ago, the Thousand Oaks-based chain has thrived among a population of ``adults who care about eating well,'' Schuessler said in a statement. The company has also enjoyed healthy financials with around $177 million in systemwide sales last year.

Wendy's has big plans for Baja Fresh, anticipating to open more than 600 restaurants by 2007. ``And for that reason we're not expecting layoffs. If anything, we're going to have to gear up,'' said Gene Cameron, Baja Fresh's vice president of marketing.

Cameron said most employees, including Baja's 49-year-old Chief Executive Greg Dollarhyde, are pleased with the deal. Wendy's wasn't the only company that courted Baja, though.

McDonald's and Burger King pursued Baja as well, especially once the company filed its public offering statements, but Cameron said Wendy's offered the most serious proposal.

The deal, which is expected to close within the month, is likely to decrease Wendy's earnings by two cents to four cents a share this year and in 2003, analysts said. But it could raise earnings by the same amount beginning 2004, adding as much as 13 cents to 15 cents by 2007.

Richard Martin, editor of the Nation's Restaurant News, said Wendy's purchase of Fresh Enterprises Inc. will serve both companies well. ``Wendy's comes up looking pretty smart ... and Baja Fresh got a pretty good deal,'' he said.

Though Wendy's and Baja's culture differ on many levels, Martin isn't concerned about marketing efforts. He said Wendy's has a solid reputation among its patrons, and those who eat at Baja have a rather diverse palate.

``The Baja consumer could eat at Wienerschnitzel one night and Spago the next,'' Martin said.

Wendy's, which has nearly 6,100 restaurants in the United States, rose $1.97, or 5.47 percent, to close at $37.97 Friday.

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(color) Patrons dine at a Baja Fresh Mexican Grill in Woodland Hills. Wendy's International has bought the chain for $275 million. Baja Fresh officials said the deal was too good to pass up.

Joel P. Lugavere/Special to the Daily News