Thursday, April 26, 2007

WSJ: Applebee's Gets Several Bids, Appoints Breeden to Board

From this afternoon's Wall Street Journal. More evidence that activist shareholders create value for all shareholders.

April 26, 2007 10:47 a.m.

Applebee's International Inc., mired in a slump, said it received several bids to be acquired and agreed to give activist investor Richard Breeden and one of his nominees board seats.

The restaurant chain described the bids as "non-binding, preliminary proposals." A committee reviewing strategic options and the board will begin "a second round of detailed due diligence discussions before asking potential buyers to submit definitive, binding proposals," the company said.

Appleebee's said it is also exploring a securitization of the company's royalty income stream and other assets, which could be used in either the recapitalization or by a potential buyer.

News of the bids came as Applebee's said it settled a battle between Mr. Breeden and the restaurant chain. Mr. Breeden, which owns 5% of Applebee's shares and is the former chairman of the Securities and Exchange Commission, is looking to gain a majority voice on the seven-member board, saying current management hasn't used the restaurant chain's capital wisely and should rely entirely on franchise operators.

The agreement announced Thursday by Applebee's, Breeden Capital Management LLC and its affiliated investment funds appointed Mr. Breeden and Laurence Harris to Applebee's board and ends a proxy contest.

The Overland Park, Kan., company had advised shareholders not to vote for a slate of four directors offered by hedge fund Breeden Partners LP.

Mr. Breeden also joins the company's strategy committee, which is reviewing strategic alternatives, and becomes a member of the corporate governance/nominating committee and the executive compensation committee. Mr. Harris becomes a member of the corporate governance/nominating committee and the audit committee.

"Applebee's management and board of directors concur with Mr. Breeden that recent company performance must improve," said Jack P. Helms, the chairman of Applebee's corporate governance/nominating committee. "Mr. Breeden has raised a number of fair and appropriate questions which our management and board will continue to consider and address."

The chain's independent directors formed a committee to explore alternatives for enhancing shareholder value, including a possible sale.

Mr. Breeden pressured Applebee's to improve returns for shareholders by cutting the number of company-owned restaurants and curbing some spending, among other moves.

The chain has been struggling to boost sales amid competition from a glut of similar-looking restaurants, at a time when pressed consumers have cut back on eating out.

Talks between the company and Mr. Breeden had dragged on without an agreement. At one point, Mr. Breeden turned down Applebee's offer to give him two of the four seats he was seeking on Applebee's board.

Mr. Breeden said Thursday, "With all parties willing to work together positively to look at the issues and to design new solutions for the future, there is no reason that Applebee's cannot make strong progress in a number of areas."

Write to Mike Barris at

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Jessica Stallbaumer said...

I am currently an employee at the Applebees located in Topeka, Ks. Recently we have been required to change our shirts to plain black polos and are not to wear the Applebees logo anymore. Many of us have frequently asked questions and gotten to answers from our managment team on exactly whats going on. Many of us have talked about the possibility of the Applebees named being sold out. Is this true and if it is how is this going to affect our jobs?

Holly said...

Man, Applebee's is so desparate for franchisees that they are practically giving out restaurant funding to open one. I got approved for franchise loans for them and I've got a foreclosed mortgage on my credit history!