By Lisa Kerner
Charlotte, N.C., July 16 - IHOP Corp. agreed to acquire Applebee's International, Inc. in a transaction worth an estimated $2.1 billion, or $25.50 per share in cash.
The all-cash transaction is slated to close in the fourth quarter of 2007 subject to shareholder approval.
For Applebee's, the deal is the result of a "comprehensive" strategic alternatives process, the company said in a news release.
"We believe the combined company, and the strength of the two brands, will drive significant value creation," Applebee's president and chief executive officer Dave Goebel said in a company news release.
"Our management team looks forward to working with the IHOP management team during the transition period."
Julia Stewart, IHOP chairman and chief executive officer, will lead the management team of the combined company.
IHOP said it plans to finance the acquisition through a whole business securitization backed by Applebee's assets, with additional borrowings under IHOP's securitization structure.
Upon closing of the acquisition, IHOP will issue new preferred stock through already committed private placements, a company news release stated. In addition, IHOP intends to use cash to reduce debt and return cash to shareholders.
IHOP identified several initiatives expected to generate increased cash flow in the combined entity, including franchising the majority of Applebee's 508 company-owned and operated restaurants; reducing capital expenditures and "re-energizing" Applebee's brand.
Applebee's was advised by Banc of America Securities LLC and Citi. The Overland Park, Kan., company develops, franchises and operates restaurants under the Applebee's Neighborhood Grill & Bar brand.
The IHOP family restaurant chain is based in Glendale, Calif.
| Acquirer: | IHOP Corp.
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| Target: | Applebee's International, Inc.
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| Transaction total: | $2.1 billion
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| Price per share: | $25.50
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| Announcement date: | July 16
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| Expected closing: | Fourth quarter
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| Stock price for target: | Nasdaq: APPB; $24.38 on July 13
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