People are chowing down on stacks of pancakes at IHOP. But they’re not eatin’ good in the neighborhood as much at Applebee’s.
That’s why one money manager wants Dine Brands, the company that owns both chains, to consider spinning off IHOP.
Dine Brands (DIN) disclosed in the proxy statement for its upcoming shareholder meeting on May 12 (which it may hold virtually because of coronavirus) that proposal from activist investment firm JCP Investment Partnership.
JCP says IHOP, which reported rising same-store sales in 2019, would be better off without Applebee’s, which posted a decline in sales last year.
JCP pointed out that two other restaurant firms, Brinker (EAT) and Darden (DRI), have fared much better after they got rid of struggling brands. (Private equity firm Golden Gate Capital bought On the Border Mexican Grill and Cantina from Brinker in 2010, and scooped up Red Lobster from Darden in 2014.)
“We believe that a standalone IHOP would be valued and classified as a growth company, which would allow IHOP to trade at a materially higher multiple,” JCP said.
Dine Brands is recommending that shareholders vote against the proposal, arguing it would limit the company’s ability to keep paying a dividend and buy back stock.
Shares of Dine Brands have plunged 75% this year even though most of its restaurants remain open and are offering more delivery services due to Covid-19.