The UK franchise owner for TGI Fridays agreed to a £177mn takeover, which will allow the US chain that is known for its chicken wings, potato skins and two-for one cocktail list on London Stock Exchange.
The deal is a major boost to the London Stock Exchange, which has been in decline for some time. On Tuesday, the London exchange faced losing more companies after a proposed removal of retailer Superdry, and an agreement for DS Smith’s takeover. Its US buyer had said that it would seek a second listing in London.
Hostmore of the UK, TGI Fridays largest franchisee in the world, which is already listed on London’s stock exchange, announced that it had reached an agreement to buy all shares, leaving its investors with 36 percent stake in enlarged business. The remaining shares will be held by shareholders in the existing US business.
Hostmore described the deal as “highly attractive” because it reflected a valuation of 5,4 times earnings before tax, depreciation, and amortization for 2023.
TGI Fridays, short for Thank Goodness it’s Friday, was founded in New York in 1964. It opened its first UK-based restaurant in Birmingham in 1985.
Over the last two decades, there have been several ownership changes. Hostmore is the result of Electra Private Equity spinning off the UK operations from the American themed restaurant chain and listing them on the London Stock Exchange.
Hostmore shares have dropped by more than 4/5 since their floatation, and now only account for a market cap of £22.7mn. Hostmore UK employs approximately 4,380 people.
TriArtisan Capital Advisors (a US-based firm of private equity) will continue to be a major shareholder.
Both businesses will generate combined revenues of £490mn and operate 189 restaurants each in the US and UK. Franchises are also present in 44 other countries.
TGI Fridays will be the new name of this entity, and its US and global operations will remain in Dallas under Weldon S. Spangler as chief executive.
TGI Fridays stated that the deal will create a global hospitality brand offering “operational flexibility and financial strength, increased scale and additional capital to ensure continued revenue”.
Stephen Welker said that the merger would “reunite businesses which are a perfect fit and were one until 2014”.
Welker was a partner in Sherborne Investment Group, which led the dissolution of the former Hostmore Owner Electra 2021. He said: “Hostmore made good progress executing its turnaround strategies over the last year.”