Applebee's to consider possible sale

Casual dining chain Applebee's International Inc. said Tuesday it is exploring its strategic options, including a possible sale of the company. The company's shares soared nearly 9 percent.

The company, based in Overland Park, Kan., said it is withdrawing its fiscal guidance as a result of the review, which could be affected by certain strategic decisions.

Applebee's had projected 2007 earnings of between $1.15 and $1.20 per share and analysts surveyed by Thomson Financial had expected $1.17 per share.

The company said there is no guarantee a transaction will occur, and it does not plan to disclose further developments until its review is complete.

Shares of Applebee's rose $2.09, or 8.63 percent, to close Tuesday at $26.32 on the Nasdaq Stock Market. The stock hit a new 52-week high of $27.32 during trading.

The company said it has formed a committee of independent directors to consider its options, and has retained Citigroup Global Markets Inc., and Banc of America Securities as financial advisers. Legal advisers include the law firms Cravath, Swaine & Moore LLP of New York and Blackwell Sanders Peper Martin LLP of Kansas City.

The casual dining sector has struggled for the past year as high fuel prices have forced its customers to cut back on dining out.

The company reported January systemwide sales of restaurants open at least a year fell 5.8 percent, partly because of winter weather. Guest traffic in company-owned stores fell 8 percent.

Applebee's struggles have attracted fierce criticism from at least one major shareholder.

Breeden Partners LP, a hedge fund operated by former Securities and Exchange Commission chairman Richard Breeden, is seeking to have four members elected to the board of directors and has pushed for a number of changes, including selling most of the company-owned restaurants to franchisees.

Bear Stearns analyst Joe Buckley upgraded Applebee's stock from underperform to peer perform following the company's announcement.

"Our prior underperform rating was premised on an expectation that Applebee's long-term plans would be focused on executing a turnaround," Buckley said in a research note. "Today's announcement obviously moves the company in a very different direction than we expected."

The company is expected to release earnings for the fourth quarter and year after markets close on Wednesday.

Applebee's was started in 1980 by two Atlanta brothers, Bill and T.J. Palmer, who originally named the concept T.J. Applebee's Rx for Edibles & Elixirs. They sold the concept in 1983 to W.R. Grace and Co., which in turn sold it to in 1988 to Abe Gustin and John Hamra, a pair of Kansas City businessmen with a good track record as Wendy's franchisees.

The company went public in 1989 and currently has 1,942 restaurants in 49 states and 17 countries.