Forbes – Applebee’s International Inc.’s announcement Tuesday that it will consider a sale of the company highlights the growing influence hedge funds are having on the restaurant industry – a trendthat’s expected to continue in 2007.
Activist hedge funds have been popping up more often across all sectors, but restaurants have been an especially hot target. They’re attractive because they’ve been underperforming, they have a lot of cash on the books and they own a lot of real estate, which can be worked into deals that provide instant cash to shareholders.
“We expect to really see continued activity in ’07, largely because we don’t think the public markets are going to be there for restaurant chains,” said Ron Paul, president of Technomic Inc., a Chicago firm that tracks restaurant-industry sales. “It’s a business that throws off a lot of cash, and the multiples are down,” he said. Investors seem to welcome the attention. Applebee’s stock rose $2.09, or 8.6 percent, to close Tuesday at $26.32 on the Nasdaq Stock Market.
