OVERLAND PARK Kan. In Applebee’s first communication to employees since announcing its pending $2.1 billion purchase by IHOP Corp., the casual-dining company said Tuesday that job cuts at Applebee’s are expected should the acquisition close, and that it was too early to determine if the chain would remain based in Kansas.
In addition, Applebee’s confirmed that offers from private-equity firms and a financial recapitalization were two options the company considered prior to agreeing to IHOP’s $25.50 per share buyout offer, which the companies announced Monday.
Should the acquisition close, part of IHOP’s turnaround plan for the stagnant Applebee’s is to sell corporate locations to franchisees and to reduce overhead and administrative costs.
“It’s expected that, over time, as company-owned restaurants are re-franchised, there will be reductions in positions directly associated with support for those re-franchised stores,” Applebee’s CEO Dave Goebel said in a letter to Applebee’s associates that was filed Tuesday with federal securities regulators.
Goebel added that the job cuts “won’t happen overnight,” as the refranchising process is expected to continue until 2010.
For the “near term” Applebee’s will continue to operate out of its headquarters here, and IHOP out of its Glendale, Calif. base, Goebel explained. A transition team comprised of both IHOP and Applebee’s management will determine where the combined company will be based in the long term, he said.
IHOP chairman and CEO Julia Stewart has said that marketing, operations and research and development efforts for the two chains should remain independent, but did not say whether headquarters would remain in separate cities. Many of those details will be decided on by the transition team, she said. The transition team also will determine which members of Applebee’s senior management will remain with the combined company.
“Our board made this decision based on what it believes is in the best interests of our shareholders,” Goebel told Applebee’s associates, “and only after a thorough evaluation of several strategic alternatives, including a sale to a private-equity firm or a recapitalization of the company.”
“We understand that this is difficult news for some of our associates,” he added.
Applebee’s executive vice president of operations, Carin Stutz, sent a similar letter to restaurant managers, which also was filed with securities regulators.
“I encourage you to stay focused on operating your restaurants,” she said. “Assure your associates that your restaurant may change ownership, but it won’t change its primary focus of providing guests with a great Applebee’s experience.”
Applebee’s said that a date for a shareholder meeting to vote on the proposed deal will be announced “in the coming weeks.”
