Applebee's settles shareholder lawsuit

Applebee's International Inc. has agreed to settle a class-action lawsuit filed by a union challenging the proposed $1.9 billion sale of the restaurant operator to IHOP Corp.

The casual-dining chain won't pay any money in the settlement but has agreed to provide its shareholders with additional information about the sale.

The New Jersey Building Laborers Pension and Annuity Funds sued in Delaware Chancery Court 10 days after the deal with IHOP was announced. The union alleged the transaction robbed Applebee's shareholders of financial benefits they might receive if Applebee's stayed independent and sold off its remaining company-owned locations to franchisees.

IHOP, based in Glendale, Calif., announced July 16 that it planned to buy the struggling Applebee's chain in a deal valued at $25.50 per share.

Julia Stewart, IHOP's chief executive officer, has said she planned to pay for the transaction in part by selling most of the 508 company-owned stores to franchisees and selling the real estate associated with the stores. Those moves would raise an estimated $950 million.

The proposed settlement requires that shareholders receive supplemental disclosures about the deal.

Union officials had said that Applebee's didn't provide information on IHOP's plan to convert to a franchise-based system; didn't discuss how its financial adviser, Citigroup Global Markets Inc., determined the company's value; and failed to provide details on the deal's financing, arranged by Lehman Brothers Inc.

Applebee's declined to comment on the settlement.

The company's shareholders are scheduled to vote Oct. 30 on whether to accept the IHOP proposal.

While the class-action lawsuit appears settled, other shareholders have criticized the deal's price as too low and plan to oppose it.

Sardar Biglari, whose Lion Fund LP owns about 1 million shares, has said he'll vote against the sale. Five members of the Applebee's board of directors say they will, too, claiming it shortchanges investors.

According to a securities filing, the five board members — including CEO Dave Goebel and Chairman Lloyd Hill — opposed the deal this summer but were outvoted by the rest of the 14-member board.