British restaurant operator Hostmore has announced the cessation of its plans to acquire restaurant chain TGI Fridays, initially valued at £177m ($231.8m), after encountering legal challenges.
The proposed all-share acquisition via Hostmore unit Thursdays (UK) announced in April 2024 would have valued TGI Fridays at approximately 5.4 times its underlying earnings for the fiscal year 2023.
Go deeper with GlobalData
However, complications arose when TGI Fridays lost control of TGIF Funding, the entity holding the legal title to franchise agreement royalties.
Hostmore noted that proceeding with the acquisition under these conditions would “impair the future revenue of the business.”
In its press statement, Hostmore said: “The board has continued to work to reach binding terms regarding the proposed all-share acquisition of TGI Fridays.
“However, the board has now confirmed with TGI Fridays that the trustee of TGI Fridays’ corporate securitisation terminated TGI Fridays as the manager of TGIF Funding, which is the company subject to the corporate securitisation.”
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataTGIF Funding is responsible for the legal title to the franchise agreement royalties, fees, and revenue from the intellectual property of the TGI Fridays business.
Hostmore highlighted the importance of the “predictable and highly cash-generative royalty stream” as a key attraction in the acquisition.
Following the termination, the company stated that the acquisition is “no longer being actively pursued,” but hinted that discussions might resume depending on future circumstances.
In August 2024, Hostmore revealed plans to transition TGI Fridays to a fully franchised model, contingent on the successful takeover.
The group has since received several formal bids for its corporate stores and is in the advanced stages of the sale process.
Despite TGI Fridays retaining ownership of the residual interest in TGI Funding, the termination has affected its control over the royalty stream and future revenue.
Hostmore, which operates 87 TGI Fridays restaurants in the UK, recently reported a 12% year-to-date decline in like-for-like sales compared to the same period in 2023.
The sale of its corporate stores is expected to be finalised later in September 2024.
However, Thursdays, the trading subsidiary of Hostmore, may not recover any significant value from the sale due to bids coming in below the par value of its borrowings.
