Applebee's (APPB) settles shareholder lawsuit

The ranks of discontented Applebee's International Inc. (NYSE: APPB) shareholders have been on the rise since the company announced that it would be acquired by IHOP (NYSE: IHP) in July. My first reaction was, If IHOP wants it, should Applebee's sell it? The deal gave Applebee's shareholders a paltry premium and shares of IHOP soared on news of the deal -- further confirmation that this was better news for IHOP shareholders than for Applebee's. In acquisitions, generally it's the opposite.

Then shareholder Sardar Biglari announced his opposition to the deal and Applebee's disclosed that five of its directors including its Chairman, CEO, and CFO opposed the deal.

Now Applebee's has settled a shareholder class-action lawsuit filed by the New Jersey Building Laborers Pension and Annuity Funds alleging that the merger agreement deprived Applebee's shareholders of the benefits they might have gotten if the casual restaurant chain had stayed independent or sold off its company-owned locations to franchisees, the Associated Press said. No money will exchange hands in the settlement. Applebee's has simply agreed to provide shareholders with greater disclosure about IHOP's post-deal plans for Applebee's.

Shares of Applebee's aren't acting as if traders expect the deal to be blocked or the price raised, but if either of those two things happens, shareholders should do quite well. Buying a few shares here looks like an interesting gamble, with a chance for profit if the anti-IHOP deal movement gains steam.