IHOP Corp. said on Monday it plans to buy Applebee's International Inc. for $25.50 per share, as the newly restructured company seeks growth outside its iconic pancake chain.
The companies said the all-cash deal, which represents a 4.6 percent premium to Applebee's closing price on Friday, was worth $2.1 billion.
Based on Applebee's 75,072,000 shares outstanding as of Aril 1, IHOP will pay $1.9 billion. The company did not immediately identify the difference between the two figures.
Excluding charges related to the acquisition, IHOP expects the transaction to add to earnings beginning in 2008.
IHOP, which franchises almost all of its restaurants, said it believes it can cut costs and re-energize the struggling bar-and-grill chain by franchising a substantial majority of Applebee's 508 company-operated restaurants.
Applebee's also has about 1,400 franchised restaurants.
IHOP said it also plans marketing and operational improvements it hopes will boost cash flow over time, which it will use to pay down debt.
Applebee's said earlier this year it was reviewing strategic alternatives for its business and that in April it had received several takeover proposals.
The casual-dining chain has been hit hard by weakened consumer spending and stiff competition from rivals, as well as grocery chains' efforts to sell more prepared meals.
IHOP, meanwhile, has been seeking new growth opportunities following a recent restructuring that has transformed it into a franchiser with more than 99 percent of its 1,319 restaurants owned and operated by franchisees.
Greenhill & Co. LLC advised IHOP, and Banc of America Securities LLC advised Applebee's on the deal, which the companies expect to close in the fourth quarter of 2007.