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Working the Numbers
February 22, 2007
Applebee’s International’s announcement that it has formed a committee to evaluate the possibility of selling or recapitalizing the Overland, Kan.-based empire (“review strategic alternatives”) immediately got analysts talking. Respected Raymond James’ analyst Bryan Elliott dispatched the most detailed.
Elliot pencils out what could happen should management sell its land and buildings via a sale-leaseback deal, which may raise $370 million. In turn, management sells the units (i.e., cash flows) to franchisees and becomes an enterprise whose only mission is to sell franchises and collect royalties.
From there, Elliott comes up with a cash-flow sum that may (or may not) equal a “residual business value” of roughly $1 billion. A few more taps on his calculator and with several caveats (he labels his scenario “aggressive”), he can imagine an equity value of $28.50 per share. Nice, given shares recently were changing hands at $26.
I say, go for the LBO!
Posted by David Farkas on February 22, 2007 | Comments (0)