June 13 (Bloomberg) -- Ihop Corp., the biggest U.S. pancake-house chain, offered to buy Applebee's International Inc., people familiar with the matter said.

The bid was for more than $2 billion, a person with direct knowledge of the offer said. There may be other bidders, said the people, who declined to be identified because the proposal isn't public. Applebee's stock-market value is about $1.92 billion.

Ihop, which has about 1,300 locations and half the market value of Applebee's, said in February it may acquire a chain that isn't a competitor. Applebee's, with 1,900 casual-dining restaurants, began seeking a buyer after shareholder Breeden Capital Management LLC nominated four board candidates in December and called the stock's performance a ``disaster.''

Applebee's ``is in the middle of a transition,'' Malcolm Knapp, a New York-based restaurant consultant, said today. ``It's going to take a lot of work.''

Applebee's stock declined 4.1 percent in the three years that ended Feb. 12, the day before it said it may sell itself. Darden Restaurants Inc., owner of the Olive Garden and Red Lobster chains, rose 86 percent during that time, while California Pizza Kitchen Inc., with about 200 restaurants, almost doubled.

``We don't comment on market rumor,'' Ihop spokeswoman Stacy Roughan said. Applebee's spokeswoman Laurie Ellison declined to comment.

Second Round

Applebee's shares rose 97 cents, or 3.9 percent, to $25.77 at 5:20 p.m. in Nasdaq Stock Market composite trading. Ihop fell 19 cents to $55.61 in New York Stock Exchange composite trading.

Ihop's offer came in the second round of bidding for Applebee's, people familiar with the matter said.

Applebee's net income has dropped eight straight quarters, declining 65 percent to $9.47 million in the three months through April 1.

Ihop's profit fell three of the past four quarters, including a 10 percent first-quarter decline to $11.3 million.

Applebee's, which is based in Overland Park, Kansas, said in April that it received several offers, without identifying the bidders. It also added activist investors Richard Breeden and Laurence Harris as directors to end the proxy fight with Breeden Capital Management.

Ihop Chief Executive Officer Julia Stewart was president of Applebee's domestic division from October 1998 to August 2001. She has said Ihop, with a stock-market value of about $969.5 million, may consider buying another chain.

`Growth Avenue'

``Acquisition remains a viable growth avenue,'' Stewart said during a February earnings conference call. ``We are looking for a non-competitive restaurant concept that is already franchising or able to be franchised that is of sufficient size and could be acquired at a reasonable price.''

Ihop, based in Glendale, California, posted sales of $349.6 million last year. Applebee's had revenue of $1.34 billion.

``It would be a pretty large transaction relative to their size,'' said Michael Gallo, an analyst at CL King & Associates, referring to Ihop. ``Julia's history coming from Applebee's would suggest a significant familiarity with the business.''

Gallo rates Ihop shares ``accumulate.''

Ihop is best known for its pancakes, waffles, crepes and other breakfast food, and also sells burgers and sandwiches. Applebee's restaurants usually have a full bar and emphasize grilled meats, as well as salads and sandwiches.

Restaurant Sales

Sales at older Applebee's Neighborhood Grill & Bar outlets stagnated over the past year as rising gasoline prices reduced some families' ability to dine out, analysts said. Sales at restaurants open at least 18 months have dropped for four consecutive quarters, including a 4 percent first-quarter fall.

Applebee's, which is being advised by Citigroup Inc. and Bank of America Corp., has also been exploring different ways to raise money. Lehman Brothers Inc. and Bank of America are helping it evaluate ways to borrow funds backed by fees from its franchisees.

An Applebee's sale would add to recent acquisitions at U.S. restaurants. Shareholders at OSI Restaurant Partners Inc., owner of the Outback Steakhouse chain, agreed to a $3.2 billion buyout this month. Wendy's International Inc. put itself up for sale in April.

Back Yard Burgers Inc., a 20-year-old chain from Cleveland, Mississippi, agreed earlier this week to sell itself to a group of investors for about $33.3 million.

To contact the reporter on this story: Josh Fineman in New York at jfineman@bloomberg.net; Jason Kelly in New York at jkelly14@bloomberg.net.

Last Updated: June 13, 2007 17:30 EDT