PROVIDENCE -- Allied Domecq PLC's Dunkin' Donuts, the world's largest coffee and baked goods restaurant chain, is fighting Wendy's International Inc.'s plan to buy bankrupt Bess Eaton Donut Flour Co. and expand its Tim Hortons restaurants.
Wendy's this month offered to buy Bess Eaton's 48 coffee and doughnut restaurants in Connecticut, Massachusetts and Rhode Island for $35 million after Bess Eaton filed for bankruptcy. Bess Eaton has asked US Bankruptcy Judge Arthur N. Votolato to approve Wendy's offer as the bid to beat at auction.
''An open and fair bid and auction process" for the asset sale is needed ''with limited restrictions being placed on bid procedures, and leaving the resolution of which bid is best to the court and not" to Bess Eaton, Dunkin' Donuts said in an objection filed Monday in US Bankruptcy Court in Providence.
Dunkin' Donuts said in the filing it is studying Bess Eaton's assets to prepare its own offer, signaling a possible bidding war. A group of Dunkin' Donuts franchisees is also exploring a buyout.
The court fight comes as Dunkin' Donuts faces increased competition from Tim Hortons and others such as Starbucks Corp. and Krispy Kreme Doughnuts Inc. Dunkin' Donuts, owned by Bristol, England-based Allied Domecq, has more than 5,800 locations in the United States and 29 other countries.
Allied bought the Randolph company in 1989. Competitor Wendy's is expanding its Tim Hortons unit, which is the largest Canadian-based coffee and fresh baked goods restaurant. It operates 2,343 stores in Canada and 184 in the United States. The chain accounts for about 40 percent of Dublin, Ohio-based Wendy's profit.
Wendy's spokesman John Barker declined to comment on the matter.
Krispy Kreme, the second-largest US doughnut chain, said last week fourth-quarter profit more than doubled as it opened stores. CEO Scott Livengood added 35 stores to the Winston-Salem, N.C.-based chain's 394 outlets and toward his goal of 1,000 in North America by the end of the decade.
While Dunkin' Donuts has 150 stores in Rhode Island, Tim Horton's only presence in New England is its two stores in Maine. Votolato said he would decide Wednesday or Thursday whether to allow the auction and sale of Bess Eaton to go forward with Tim Hortons as the leading bidder.
Bess Eaton, founded in 1954 and based in Westerly, R.I., is owned by Louis Gencarelli Sr. The proposed sale doesn't include Bess Eaton's bakery and headquarters building. Gencarelli filed for personal bankruptcy to help ease the transaction. Bess Eaton creditors, owed about $17.6 million, will be fully paid, court papers show.
Wendy's shares yesterday rose 63 cents to $40.63 in New York Stock Exchange trading. Allied Domecq's American depositary receipts, each representing one ordinary share, rose 23 cents to $32.08.