IHOP acquires Applebee's

By Lisa Kerner

Charlotte, N.C., Nov. 29 - IHOP Corp. successfully completed its $2.1 billion acquisition of Applebee's International, Inc., creating one of the largest full-service restaurant companies in the world, it was announced on Thursday.

Applebee's shareholders will receive $25.50 per share, and the company's stock will cease trading on the Nasdaq effective Friday.

IHOP said it plans to franchise the majority of Applebee's 510 company-owned restaurants as it transitions the business to a highly franchised system.

IHOP no longer expects the acquisition to be accretive to earnings in 2008 due mainly to the settlement of a interest rate swap transaction and related financing costs.

"We are delighted to complete the acquisition of Applebee's as it represents an opportunity to create significant long-term value for IHOP shareholders over and above what we could have achieved on a standalone basis," IHOP chairman and chief executive officer Julia A. Stewart said in a company news release.

"Additionally, we believe that our core competencies of re-energizing restaurant brands, franchising and expense management are ideally suited to improve Applebee's overall brand and financial health."

In connection with the acquisition, IHOP subsidiaries completed two separate securitization transactions with total proceeds of $2.039 billion. The transactions consisted of an issuance of debt collateralized by IHOP restaurant assets and a separate issuance of debt collateralized by Applebee's restaurant assets, a company news release stated.

IHOP also completed a private placement of $190 million of non-convertible preferred stock and $35 million of convertible preferred stock, the proceeds of which were used to fund the Applebee's acquisition.

The Applebee's securitization totaled $1.794 billion and consisted of four classes of fixed rate notes: $675 million of class A-2-II-A senior notes, $650 million of class A-2-II-X senior notes, $350 million of class A-2-I senior notes and $119 million of class M-1 subordinated notes.

The Applebee's securitization also included a revolving credit facility of $100 million of series 2007-1 class A-1 variable funding notes issued in two classes: $30 million of class A-1-A variable funding notes and $70 million of class A-1-X variable funding notes.

Applebee's, based in Overland Park, Kan., develops, franchises and operates restaurants under the Applebee's Neighborhood Grill & Bar brand.

The IHOP family restaurant chain is based in Glendale, Calif.

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