Wednesday, July 18, 2007

Applebee’s to Pursue Sale Leaseback 508 Company Owned Restaurants

New York Times/Reuters - July 17, 2007

The franchise restaurant chain IHOP said yesterday that it planned to buy Applebee’s International for $25.50 a share to expand beyond its pancake houses, sending IHOP shares up nearly 9 percent. The all-cash deal, which represents a 4.6 percent premium to Applebee’s closing price on Friday, is worth about $1.9 billion, excluding debt, based on the company’s 75,072,000 shares outstanding as of April 1.

With a market capitalization of $980.6 million, IHOP is using securitized debt backed mostly by Applebee’s assets to finance the purchase of Applebee’s, which has a market value of $1.82 billion.

IHOP said it planned to sell, and then lease back, the real estate of Applebee’s 508 company-owned restaurants, at a rate of about 40 stores each quarter, to raise cash to help reduce the debt.

IHOP’s chief executive, Julia A. Stewart, a former Applebee’s president, said the company intended to “fundamentally change” Applebee’s business model, “moving it nearly completely out of the role of owner-operator to one that is predominantly a franchiser.” Sphere: Related Content

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