Proactive Investors - Hostmore PLC (LON:MOREH), the largest franchisee of the TGI Fridays restaurants, has announced a £177 million paper deal to effectively merge with the franchisor.
The proposed all-share acquisition of TGI Fridays Inc would see Hostmore’s current shareholders owning some 36% of the enlarged company, whilst TGI Fridays shareholders will hold 64%.
It pitches the enterprise value of TGI Fridays at approximately £177 million, equating to about 5.4 times its FY23 underlying earnings (EBITDA), Hostmore noted.
The new company, TGI Fridays Plc, will remain on the London Stock Exchange under the ticker ‘TGIF’.
Hostmore chair Stephen Welker described it as “a natural fit” whilst noting that the full terms of the deal to ‘reunite’ the businesses was still the subject to ‘advanced discussions’.
The transaction remains conditional upon due diligence, shareholder approval, and regulatory clearances – though the aim is to complete by the end of the third quarter of 2024.
“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, and pursuing high ROI organic growth initiatives,” Welker said in a statement.
“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.”
TGI Fridays chair Rohit Manocha, meanwhile, added: “Today marks 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.”