Risk & Compliance

Not So Good in the Neighborhood

Breeden Capital, an activist hedge fund headed by the former SEC chairman, wants four seats on the Applebee's board; restaurant chain delivers a ha...
Dave Cook and Stephen TaubMarch 9, 2007

Applebee’s International has announced that negotiations with Breeden Capital, the activist hedge fund headed by former Securities and Exchange Commission chairman Richard Breeden, have failed to secure an agreement regarding its board of directors.

The hedge fund, which owns 5 percent of the company’s shares, is seeking four seats on the board; Applebee’s has offered two.

On March 2, according to the company, it offered one of the Breeden nominees, founding partner Steven J. Quamme, an immediate seat on the Applebee’s board, on the strategy committee of independent directors and on the governance committee. Applebee’s, which asserted that Quamme was the only Breeden nominee with both restaurant-industry and transaction experience, also asked the hedge fund to withdraw its other candidates. The fund turned down the offer.

A day later, Applebee’s offered a second seat — to either of the other two Breeden nominees, Raymond G.H. Seitz or Laurence E. Harris — but this offer was rejected as well.

Applebee’s, which noted that it would have expanded its board to 14 members (from 12) to accommodate the new nominees, “continues to thoughtfully consider Breeden Capital’s comments regarding its business strategies,” as it maintains has been the case for the past eight months. According to Applebee’s, however, Richard Breeden apparently prefers “to continue with his proxy fight.”

Breeden launched his hedge fund at the beginning of 2006 with about $500 million in assets. Applebee’s is his first activist target. He also owns 3.9 percent of Steris Corp., a medical-products company with a market capitalization of $1.65 billion. Other large holdings in his $329 million, eight-stock portfolio include H&R Block and Alexander & Baldwin.