IHOP Corp. to Acquire Applebee's International, Inc.

On July 16 IHOP Corp. (NYSE: IHP) and Applebee's International, Inc. (NASDAQ: APPB), jointly announced a definitive agreement under which IHOP Corp. ("IHOP") will acquire Applebee's International, Inc. ("Applebee's") for $25.50 per share in cash, representing a total transaction value of approximately $2.1 billion.

Over the last five years, IHOP has successfully re-energized its nearly 50-year old brand while transforming itself into a pure-play franchisor with more than 99% of its 1,319 restaurant system owned and operated by franchisees. IHOP believes that it can employ similar strategies to transform and re-energize Applebee's. IHOP intends to franchise a substantial majority of Applebee's 508 company-operated restaurants and expects to realize significant cost savings as a result. Additionally, management will focus on driving marketing and operational improvements aimed at re-energizing Applebee's system performance. These changes are expected to result in significant and increasing cash flow over time, which will be used to initially reduce debt incurred in connection with the acquisition. Once debt levels are reduced, IHOP intends to return to its long-term commitment of returning cash to its shareholders through share repurchases. At present, IHOP expects to continue quarterly dividend payments at the discretion of its Board of Directors.

IHOP Chairman and Chief Executive Officer Julia Stewart, who will lead the management team of the combined Company, said, "Over the past year and a half, we have been evaluating alternatives that would allow us to leverage IHOP's proven competencies in order to create additional long-term value for shareholders, including a potential acquisition. Applebee's meets all of our acquisition criteria and we expect the combination to generate significant additional value for our shareholders."

Added Ms. Stewart, "We look forward to applying the same focus and discipline to Applebee's that we have employed at IHOP over the last several years. We have successfully restructured our own company, and in the process, re-energized our brand, improved our operational performance and maximized the development of franchise restaurants."

"This transaction represents the culmination of a comprehensive strategic alternatives process led by the Strategy Committee of our Board of Directors to identify the best alternative to create value for Applebee's shareholders," said Dave Goebel, President and Chief Executive Officer of Applebee's International. "We believe the combined Company, and the strength of the two brands, will drive significant value creation. Our management team looks forward to working with the IHOP management team during the transition period."

The transaction is expected to result in earnings accretion, exclusive of one-time transaction-related charges, in 2008 and beyond. The acquisition of Applebee's is also expected to substantially enhance IHOP's cash generating profile. Following the closing of the transaction, IHOP intends to utilize cash to reduce debt to a specified level and thereafter return cash to shareholders. The following initiatives are expected to generate increased cash flow in the combined entity:

-- Franchising the majority of Applebee's 508 company-owned and
operated restaurants;

-- Reducing related General & Administrative expenses as those
restaurants are franchised;

-- Selling Applebee's-owned real estate and executing related
leasebacks;

-- Reducing capital expenditures as Applebee's is transitioned
quickly out of its more capital intensive company operations
model; and

-- Re-energizing Applebee's brand, driving same-store sales
performance and improving the system's operational performance
and profitability.

Financing

IHOP intends to finance the all-cash transaction through a whole business securitization backed by Applebee's assets and additional borrowings under IHOP's securitization structure. IHOP has secured a bridge facility commitment to fund the transaction pending the completion of both securitizations. In addition, upon the closing of the acquisition, IHOP will issue new preferred stock via already committed private placements.

The all-cash transaction, which is expected to close in the fourth quarter of 2007, is subject to the approval of Applebee's shareholders, customary closing conditions and regulatory approvals.

Advisors

Greenhill & Co., LLC acted as financial advisor, and Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor to IHOP in connection with this transaction. Banc of America Securities LLC served as financial advisor to Applebee's and Citi served as financial advisor to its Strategy Committee during the review of strategic alternatives. Cravath, Swaine & Moore LLP, New York, Simpson Thacher and Bartlett LLP, New York, and Blackwell Sanders LLP, Kansas City, acted as legal advisors to Applebee's. Lehman Brothers is acting as sole structuring advisor and sole underwriter in connection with the Applebee's and IHOP securitizations and is providing the bridge facility to IHOP, if required. -IHOP