Casual dining chain Applebee’s International Inc. announced Thursday that it has received several preliminary offers to buy the company.
Based on those nonbinding bids, the Overland Park, Kan.-based company said it will have a second round of discussions before asking potential buyers to submit definitive, binding offers. The company would not comment further on the preliminary offers.
Applebee’s also announced Thursday that it has ended its proxy fight with one of its largest shareholders, Breeden Capital Management LLC, a month before its annual meeting.
The company said it agreed to give Breeden two seats it wanted on Applebee’s board, one for Richard Breeden, the former Securities and Exchange commission chairman who runs Breeden Capital, and the other for attorney Laurence Harris, a Breeden ally.
The board will be temporarily expanded from 12 to 14 members.
In March, Applebee’s said that Breeden had refused its offer of two seats on the board, one for founding partner Steven J. Quamme and one for either Harris or Raymond G.H. Seitz, non-executive chairman of Sun-Times Media Group Inc.
“During the course of discussions over the past few months, we realized that all parties share a strong desire to strengthen and improve the company,” Jack P. Helms, chairman of Applebee’s corporate government and nominating committee, said in a written statement.
Shareholders will vote on the slate of directors at the company’s annual meeting May 25.
The company said it plans to return to a 12-member board that will include both Breeden and Harris by the 2008 annual meeting.
The proxy fight was part of Breeden’s campaign to force major changes at Applebee’s, including the sale of most of its company-owned stores.
“Applebee’s management and board of directors concur with Mr. Breeden that the recent company performance must improve,” Helms said. “Mr. Breeden has raised a number of fair and appropriate questions, which our management and board will continue to consider and address.”
Breeden said his hedge fund, which owns 5.2 percent of Applebee’s, invested in the restaurant chain because he and his partners believe it is “a fundamentally strong company.”
“I am convinced that as a group we can provide the leadership to make Applebee’s better, stronger and more valuable for the benefit of all,” he said in a written statement.
In a research note, Friedman, Billings, Ramsey & Co. analyst Ashley Woodruff said Applebee’s may have been concerned that a proxy fight would interfere with a potential buyout. Still, she said, other things could affect a possible deal.
“Applebee’s operates in one of the most challenging sectors of the restaurant space (bar and grill casual dining), and soft fundamental trends are likely to offset the highly franchised business model for buyout valuations,” Woodruff wrote.
Applebee’s, which has suffered from lackluster sales over the past year, announced in February that it was considering its strategic options, including a possible sale.
On Thursday, the company said it was still considering all of its options, not just a sale. In addition to evaluating potential offers, it is looking at how it could improve profits and is working with its financial adviser, Citicorp Global Markets Inc., to evaluate a possible recapitalization.
Shares of Applebee’s closed up $1.09 at $26.93 in trading Thursday on the Nasdaq Stock Market, where they have traded in a 52-week range of $17.29 to $27.32.