Hostmore’s all-share acquisition of TGI Fridays is unlikely to be completed during the third quarter, as previously announced in April, the company said in a regulatory filing this week. Hostmore, TGI Fridays’ U.K. franchisee, entered into a business combination agreement with the full-service chain in a deal worth $220 million.
As part of that original deal, Hostmore, which currently trades on the London Stock Exchange, would combine with TGI Fridays and rename itself TGI Fridays plc. Management from both companies would combine, with TGI Fridays’ prior C-suite maintaining an office in the U.S.
Hostmore and TGI Fridays are now planning for the combined business to be fully franchised and are working on selling Fridays’ 92 corporate locations and Hostmore’s 87 units, per the filing. These stores are going to be sold to new or existing franchisees, who would then pay royalties. TGI Fridays has entered into agreements to sell a chunk of its locations for over $40 million already. These deals would lead the combined company to have nearly 600 franchised units worldwide.
As part of the original deal, the combined company was going to undergo refinancing once the transaction was completed. Because of the sale of the company-owned units, the combined company will need less money and a long-term debt financing package is no longer needed. The proceeds of the corporate store sales will go toward reducing indebtedness, Hostmore said.
“This revised business model and financing structure, while ultimately more cost-effective and accretive to shareholder value, involves a longer timeline than the third-party refinancing process that had been commenced earlier in the year,” Hostmore said in the filing. “The Board and TGI Fridays continue to work closely and collaboratively towards a positive result.”
However, Hostmore’s board is working on additional options to secure value for Hostmore should the deal fall through, per the filing.
