OVERLAND PARK, KAN. Applebee’s International Inc. has defused a looming proxy battle with dissident shareholder Richard C. Breeden by giving him and one of his nominees seats on its board of directors—a move that one analyst said could clear the way for a sale of the casualdining giant. —
After reaching an agreement late last month with Breeden’s hedge fund, Breeden Capital Management LLC, which holds a 5.4-percent stake in Applebee’s, the restaurant company said it had received several “nonbinding preliminary proposals” to acquire the parent of the 1,930-unit Applebee’s brand. Applebee’s, which has suffered weak sales, slowed traffic and declining profit for more than two years, began in February exploring strategic options for the company. —
“We believe the indications of interest motivated the [Applebee’s] board to settle with Breeden Capital in order to reduce the risk of the proxy battle interfering with a potential buyout,” securities analyst Ashley R. Woodruff of Friedman, Billings, Ramsey & Co. Inc. said in a report. —
Breeden had initiated a proxy battle to nominate four Breeden-sponsored directors to infuse “fresh thinking” into Applebee’s board. The contest was to culminate at the company’s annual shareholder meeting May 25. —
Applebee’s said its strategy committee would review the preliminary bids before asking potential buyers to submit “definitive, binding” proposals. Most industry observers contend that a private-equity firm or group would be the most likely buyers. —
Breeden said in an interview last month that he would not object to a sale of Applebee’s, if the company was able to garner the right price. Most analysts place a per-share buyout offer in the high-$20-to-low-$30 range, placing the deal’s value in excess of $2 billion. —
Applebee’s said it would continue exploring options other than a sale, including a recapitalization and a securitization of the company’s royalty stream, a move that other restaurant companies including IHOP Corp., Domino’s Pizza Inc. and Sonic Corp. have undertaken recently. Applebee’s gave no timeline for an outcome to its strategic review. —
Breeden and his board nominee, Laurence Harris, partner at the Washington, D.C.-based law firm Patton Boggs LLP, began serving as Applebee’s directors April 25 and will be added to Applebee’s slate of director nominees for three-year board terms. Breeden also was added to the restaurant company’s strategy committee. —
In announcing the new board directors, Applebee’s cited Harris’ “significant experience in mergers and acquisitions and other areas of corporate finance.” —
Applebee’s board now will have 14 people rather than 12. Other board nominees are current directors Jack P. Helms, principal at investment bank Goldsmith, Agio, Helms & Co.; Lloyd L. Hill, Applebee’s chairman and former chief executive; Burton “Skip” M. Sack, a former Applebee’s franchisee and corporate executive; and Michael A. Volkema, chairman and chief executive of furniture manufacturer Herman Miller Inc. —
Applebee’s said it would reduce the size of its board to its original 12 members by the 2008 annual meeting, according to regulatory filings. —
Breeden has pressured the company since last October to reduce the number of corporate locations, sell real estate assets and trim corporate spending, especially by restructuring compensation practices. Just last month he rejected an offer from Applebee’s for two board seats and a confidentiality agreement to monitor the company’s strategic review, saying in an interview that it was a “public relations play” on Applebee’s part. —
When the settlement with Applebee’s was announced he said in a statement, “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.” —
Applebee’s Helms, chairman of the board’s corporate governance and nominating committee, said, “Applebee’s management and board of directors concur with Mr. Breeden that recent company performance must improve.” —
He added, “Mr. Breeden has raised a number of fair and appropriate questions which our management and board will continue to consider and address.” —
