The parties have agreed that the transaction, which brings together TGI Fridays’ largest franchisee with the global franchisor, will result in existing Hostmore shareholders holding a 36% shareholding in the enlarged business upon completion.
TGI Fridays shareholders will hold a 64% shareholding in the combined group, which will be renamed TGI Fridays plc.
Under the listing rules of the Financial Conduct Authority, the transaction would be classified as a ‘reverse takeover’ and be conditional upon approval by existing Hostmore shareholders.
TGI Fridays primarily operates through franchising and licensing agreements in the US and in 43 international markets. It also operates a network of company-owned stores in the US.
It is the master franchisor to 493 franchised stores, with 128 located in the US, 89 in the UK (the Hostmore portfolio), and 276 across a further 42 countries. It has 4,447 employees.
The enterprise value of £177m is approximately 5.4x of TGI Fridays’ FY23 underlying EBITDA.
The combined group would have had underlying FY23 revenue of approximately £490m, an approximately 9% EBITDA margin, and free cash flow of more than £30m.
“I am pleased to announce that we are in advanced discussions with TGI Fridays on the terms of a proposed transaction,” says Stephen Welker, chairman of Hostmore.
“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.
“We look forward to presenting our existing and new shareholders with the opportunity to participate in the significant value creation potential of the combined group going forward.”
Rohit Manocha, chairman of TGI Fridays, adds that the deal ‘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,” he says.
“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 TGI Fridays’ global franchising and licensing infrastructure.”
Hostmore’s portfolio also encompasses Fridays and Go, a fast casual offshoot of the TGI Fridays concept; and cocktail-led bar and restaurant brand 63rd+1st.