TGI Fridays’ largest franchisee Hostmore has agreed to a £177m takeover of the fast-food dining chain in the UK, in a rare burst of good news for a firm listed on the London Stock Exchange.
The agreement would lead to Hostmore shareholders holding a 36 per cent stake in the enlarged business with TGI Fridays shareholders having 64 per cent.
The “transformational combination” would merge “TGI Fridays’ largest franchisee with the global franchisor”, and is being classed as a reverse takeover.
Hostmore, which is listed on the London Stock Exchange, will buy TGI Fridays for 5.4x its EBITDA, which it said represents a “a highly attractive acquisition”, with a combined revenue of £490m.
It currently operates 89 TGI Fridays across the UK and employs approximately 4,380 staff.
Stephen Welker, Chairman of Hostmore, said the talks “would reunite two businesses that are a natural fit, and were one business until as recently as 2014.”
“Hostmore has made good progress in executing its turnaround strategy over the past year by reducing costs, revising our capital allocation policy to focus on debt repayment and shareholder distributions.
“This acquisition would give us the scale and flexibility to accelerate our existing strategy and enhance the financial outlook for Hostmore and scope for shareholder returns, while also strengthening our ability to provide an exceptional guest experience by harnessing our distinctive, trusted brand as the home of celebrations.”
Rohit Manocha, chairman of TGI Fridays, said the moved marked “an exciting moment for the next chapter of the TGI Fridays story, as we continue to drive forward our brand revitalisation strategy.”
“Bringing together TGI Fridays with our leading franchisee partner in Hostmore, in our largest international market, the United Kingdom, has a compelling and highly complementary strategic logic to it.”
“Our two companies share close ties and have a longstanding, excellent working relationship and mutual respect. A combined group would stand to gain from our focused efforts with the benefit of greater combined scale, efficiencies and flexibility.”
“By joining forces with Hostmore, this would support our long-term organic growth strategy and enable us to better harness (our) global franchising and licensing infrastructure”.