OVERLAND PARK Kan. Although it needs an additional six to eight weeks to conduct a financial review, Applebee's International Inc. said it had instructed its financial and legal advisors to contact potential buyers "in an organized process" as part of its exploration of strategic alternatives.
Analysts have said potential buyers of Applebee's 1,942-unit system would most likely include larger private-equity firms that could manage a possible high price tag. One analyst told Nation's Restaurant News that any buyer would need to be capable of providing at least $800 million in equity as part of a deal. Larger private-equity firms with restaurant industry holdings include Bain Capital Partners, Kohlberg Kravis Roberts and Carlyle Group.
Applebee's said its strategy committee, which formed last month to explore corporate options for boosting shareholder value, had a "broad mandate" to conduct a full review of every alternative and that it was "premature to comment on the likelihood or potential values in a recapitalization or sale."
The strategy committee is co-chaired by independent board members Jack Helms, chairman of Goldsmith, Agio and Helms, a Minneapolis-based investment banking firm, and Eric Hansen, member, Holman, Hansen & Colville, P.C., a Kansas City law firm. The committee's other members are: Mike Volkema, chairman of the furniture company Herman Miller Inc.; Burton "Skip" Sack, former Applebee's franchisee and executive, former National Restaurant Association chairman and Applebee's largest individual shareholder; and Pat Curran, chairman of Cook Composites and Polymers.
"Our goal is to develop visible business and financial initiatives that maximize value for all shareholders," Helms said. "We are leaving nothing of significance out of our scope and have not yet reached any conclusions, preliminary or otherwise...members of the strategy committee and full board are substantial shareholders in their own right, so our work clearly aligns with the best interests of our shareholder base."
On Friday, Applebee's disclosed it could not come to an agreement with activist investor Breeden Capital LP, a 5-percent stakeholder that is pressuring Applebee's to cut spending, refranchise corporate units and return additional capital to shareholders. Breeden is lobbying for four seats on Applebee's 12-person board of directors, but declined offers from Applebee's of two seats that would take the board to 14 positions.
Applebee's statement on Monday said its committee is focusing on returns on capital, the mix of corporate versus franchised restaurants, overhead cost structure and strategies for improving same-store sales. In addition, it is seeking an "optimal capital structure," and determining potential uses of proceeds from any additional borrowings.
Applebee's has been struggling for two-plus years with declining same-store sales and reduced profits. Breeden Capital is a hedge fund founded and managed by former Securities & Exchange Commission chairman Richard Breeden.