Applebee's: Is a Buyout on the Menu?

Shares of the restaurant operator climbed Tuesday after it said it was exploring moves to boost shareholder value

Applebee's International (APPB) said Feb. 13 that it's thinking about selling itself. The casual dining chain operator from Overland Park, Kan. has been struggling to keep customers coming in recent months and took some heat this year from shareholder Breeden Partners.

The entire industry had it tough in 2006, as high fuel prices and rising borrowing costs made low-income consumers more cautious about spending on luxuries like restaurant meals. Now Applebee's hired Citigroup Global Markets Inc and Banc of America Securities for financial advice on how to explore strategic alternatives for enhancing shareholder value, including a possible recapitalization or sale of the company, according to a press release Feb. 13.

In January the investment firm Breeden Partners, which holds more than 5% of the company's shares, had railed against everything from Applebee's sliding operating performance to the way it pays senior executives. "The disastrous performance of Applebee's share values during the past three years mirrors the steady deterioration that has been going on in Applebee's operations," Richard C. Breeden said in a letter Jan. 25 that was filed with the Securities and Exchange Commission.

Applebee's stock had traded at around $24.23 per share three years ago, according to Yahoo. But after the news Feb. 13 the stock definitely wasn't languishing; it soared 9.3% to $26.49 per share in early trading on the Nasdaq.

CEO Dave Goebel has been fighting to help his company recover. For example, he's tried to woo customers with recent efforts like a new promotion featuring meals developed in partnership with the celebrity chef Tyler Florence. In May, 2004, Applebee's had also announced a plan to provide Weight Watchers items on its menus, which include appetizers, entrees and desserts that provide information about things like fat and calories. The question remains, though, if the company itself is appetizing enough to fetch a decent premium from a potential acquirer.

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