M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Monday, July 16, 2007

The Great Pancake

IHOP Corp. today announced an agreement to acquire Applebees International, Inc.   IHOP will pay  $25.50 per share in cash, representing a total transaction value of approximately $2.1 billion.  The press release was a bit scarce on transaction terms, though the deal is all-cash and will be consummated through a merger.  Break fees were not disclosed nor future arrangements with Applebee's management.  IHOP will finance the transaction through a securitization of the entire Applebee's business underwritten solely by Lehman Brothers.  For those who want more details, the conference call will be at 8:30 a.m. Eastern Time. To participate, dial 800-798-2801 and reference pass code 67127217. 

The transaction premium was a low 4.6% premium over Friday's closing price on the Nasdaq and below the company's 52-week high of $29.10.  But Applebee's has been on the block since February after investor Richard C. Breeden conducted a successful proxy solicitation to obtain board representation for his firm.   Breeden who is now on the Board also apparently voted to approve a sale.   So, it remains to be seen if another bidder will emerge or even shareholder protest at the low premium.  Still, I'm surprised at the use of cash rather than stock consideration by IHOP; one would have thought that Applebee's shareholders would have liked to participate in the future upside of any deal. 

And I'll close with a quote from a prior post on this possible combination:

A combination of IHOP and Applebees would be an unstoppable force in the American suburb. People wouldn't leave, and the branches would develop into self-sufficient communities like the Arcologies in SimCity 2000 or the Bio-Dome invented by Pauly Shore or your average Wal Mart Super Center.


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