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Stewart’s back! IHOP to buy Applebee’s

Julie Stewart is coming back to Applebee’s. Or, more accurately, Julie Stewart is bringing Applebee’s to her.

Stewart, the chief executive at California-based family chain IHOP, announced last month that her company plans to buy struggling casual-dining chain Applebee’s—where she spent three years as president of its domestic division before her departure in 2001. The all-cash deal was valued at $2.1 billion.

“As many of you know, I have a personal history with Applebee’s,” Stewart said in a conference call with analysts, “and believe that my experience will be a benefit to the combined company, both in terms of familiarity with Applebee’s operations as well as my relationships with its franchisees.”

The deal is an indication of the direction each company has been heading in recent years. Applebee’s has been struggling with flat or declining same-store sales as diners have opted for less expensive fast-casual or fast-food options. The chain in April announced that it received several purchase offers. IHOP, meanwhile, has seen sales growth for each of the past 18 months. Its stock price is trading at or near its 52-week high at over $60 a share.

IHOP is nevertheless buying a larger company. Applebee’s has nearly 2,000 stores and last year had $1.34 billion in revenues. IHOP has more than 1,300 stores and took in $349.6 million in revenues last year. Combined, the company will total system-wide sales of more than $6.8 billion, including franchise operations.

IHOP officials believe they can turn around Applebee’s in part through franchising. Should the sale receive the proper approvals from regulators and shareholders, IHOP plans to sell about 40 of Applebee’s 500 company-owned restaurants every quarter through 2010. It would begin that effort in 2008.

Blackstone to take Hilton private

Hilton Hotels Inc., is going private. Sort of. The California-based hotel giant agreed to be bought by New York-based private equity firm The Blackstone Group—which itself recently went public—in a $26 billion deal.

Blackstone will pay $47.50 in cash for each share of Hilton, a 40-percent premium over the company’s stock price the day before it was announced, on July 3.

The purchase will make Blackstone the world’s largest hotel operator. Already, the company has 100,000 rooms, including La Quinta Inns and LXR Luxury Resorts and Spas. It adds several larger brands run by Hilton, which has 2,800 hotels and 480,000 rooms around the world— including the Hilton chain and Hampton Inn along with Embassy Suites, Doubletree and the Waldorf=Astoria hotels.

Worldwide demand for hotel rooms has spurred Hilton’s growth in recent years. The company in 2005 ended a longtime split with Hilton International by purchasing the chain and as a result doubled its revenue last year, to $8.2 billion. The deal would give the company much larger financial backing—Blackstone manages $88.2 billion in assets.

Wendy’s sale possibility grows

Wendy’s appears to be moving closer to the auction block. The Ohio-based burger chain said in June that it would look into being sold. That same month its largest shareholder, Nelson Peltz, expressed interest in purchasing the hamburger chain. Peltz is the chief executive of Trian Fund Management and chairman of Arby’s franchisor Triarc Companies—where he was CEO until June. Peltz called Triarc “a natural strategic buyer for the company,” but added that neither Triarc nor Trian was making an official bid.

In April, Wendy’s announced the formation of a special committee, headed by Pickett, to explore strategic options for the company, but seemed hesitant to consider a sale. In June, citing lower-than-anticipated same-store sales and higher-than-expected commodity costs, the company cut 2007 earnings forecasts and confirmed that it would look into being sold.

Denny’s announces franchise growth plan

Denny’s Corporation intends to accelerate franchise growth that will allow both new and existing franchisees to purchase company restaurants in, and sign exclusive development agreements for, particular markets.

The plan has already led to the sale of 34 company restaurants to new and existing franchisees as well as deals with those franchisees to develop 26 new units in markets such as Myrtle Beach, S.C., Houston, and Southern California.

Brinker, Olympus complete sale

Pepper Dining Inc., a franchise company created by private equity firm Olympus Partners, purchased 95 Chili’s Grill & Bar restaurants throughout the Northeast and Mid-Atlantic regions for $155 million. Pepper Dining will also develop 14 to 38 Chili’s restaurants during the next several years.

IHOP has a new biggest franchisee.

Argonne Capital Group, already the owner of 51 IHOP locations in Texas, has purchased the operations and development rights of the chain’s largest franchisee, FMS Management Systems out of Florida. Financial details were not disclosed.FMS operates and sub-franchises 148 IHOP locations, mostly in Florida and generated $189 million in sales last year. The combined operations of FMS and Argonne’s Texas stores, known as ACG Texas, have close to 200 units and sales close to $270 million.

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