IHOP wraps up Applebee’s

DOWNTOWN — Glendale-based pancake house operator IHOP Corp. announced Thursday that it had completed its approximately $2.1 billion purchase of casual dining chain Applebee’s International Inc.

The deal combines two of the largest full-service restaurant chains in the country — IHOP Corp. has 1,328 eateries, Applebee’s has 1,955 — giving IHOP Corp. reign over what the company said is now the largest full-service restaurant operation in the world in terms of the number of restaurants owned.

“We are delighted to complete the acquisition of Applebee’s, as it represents an opportunity to create significant long-term value for IHOP shareholders over and above what we could have achieved on a stand-alone basis,” Julia Stewart, IHOP chief executive officer, said in a statement.

IHOP began pursuing the deal after Applebee’s put itself up for sale in February, reportedly amid investor concerns about the company’s slumping stock prices.

Thursday’s deal translated into a $25.50-per-share cash pay-off for Applebee’s investors, whose stock had risen steadily since IHOP announced plans to buy Applebee’s on July 16, when shares closed at $24.91. In their last day of trading Thursday, Applebee’s stocks closed at $25.48.

The payoff for IHOP investors, however, is further down the road, company officials said. Owing to financial costs related to the deal, the company does not expect its acquisition of Applebee’s to reflect in its 2008 earnings, the company said in a statement.

But IHOP won’t waste time in following through with its plan to convert most of Applebee’s company-owned and operated restaurants into franchises. Of the 1,955 Applebee’s restaurants worldwide, 510 were company-owned and operated. IHOP executives hope to convert 475 of the company-owned and operated Applebee’s to franchises by 2010.

By converting the remaining company-owned eateries into franchises, IHOP expects to capitalize on reduced costs associated with running the chain and generate revenue by selling and releasing Applebee’s real estate, the company said in a report Thursday.

Sales of Applebee’s-owned stores and franchising fees will help IHOP pay off the more than $2 billion in securitized debt used to finance the acquisition, the report said.

The company’s plan to apply a pure franchiser model to the Applebee’s chain comes about four years after IHOP underwent a similar transition itself.

The acquisition is not expected to result in a change in the number of people employed by IHOP in Glendale, IHOP spokeswoman Lucy Neugart said. Currently, the company’s Glendale headquarters employs 200 to 250 people, Neugart said.

Shares of IHOP Corp. closed at $50.74 Friday, down from the $61.24 the company sported in July when IHOP announced it would buy Applebee’s.

 RYAN VAILLANCOURT covers business, politics and the foothills. He may be reached at (818) 637-3215 or by e-mail at ryan.vaillancourt@latimes.com.