Chain Leader

David Farkas

Dave’s Dispatch: Building Consensus
April 30, 2007

Man, the committees. As of late April, Wendy’s and Applebee’s had formed committees to hash out what’s best for shareholders and management including possible sales of the companies. No doubt OSI Restaurant Partners formed one, too, as the board of directors scratched its collective head over the best course of action for the legendary yet beleaguered company.

Recently OSI ’s proxy-vote adviser suggested that a go-private buyout to the tune of $3.2 billion is the best direction because it leaves existing management in place. Bain Capital and Catterton Management, both old hands in the restaurant game, are combining forces to pay $40 a share (roughly 9.5 times EBITDA) to gain control of the company.

Meanwhile, the outcome for Wendy’s and Applebee’s remains uncertain. Both chains will probably recapitalize their considerable assets if no buyers show up.

Who, for instance, wants Wendy’s? It’s hard to imagine another restaurant company acquiring it, although Triarc CEO Nelson Peltz, a major shareholder, may be an eventual suitor. A financial sponsor might step in, but that, too, seems a long shot given that management has repurchased much of its own stock.

Applebee’s, which is struggling after losing 5 percent of its customer base during last summer’s energy and adjustable-rate-mortgage spikes, says several buyers have made bids for the casual-dining chain. A committee of independent directors is reviewing the bids.

This, while Applebee’s management is trying to patch up a nasty relationship with former SEC chairman and major shareholder Richard Breeden, who is pushing the company to cut costs, notably those associated with executive perks.

Posted by David Farkas on April 30, 2007 | Comments (0)