Hostmore Sinks 91% With TGI Friday’s Deal Off and Delisting Likely

(Bloomberg) -- A potential takeover of restaurant chain TGI Friday’s Inc. by its largest franchisee has fallen apart, and shares of UK hospitality firm Hostmore Plc shares plunged a record 91% as the firm expects to be delisted.

The buyout isn’t proceeding as TGI Friday’s last week lost control over many of its assets, the firm said in a statement Monday. Hostmore added its planned sale of corporate stores generated bids which indicate consideration will be less than the borrowings secured by its Thursdays unit. As such, Hostmore doesn’t expect to “recover any meaningful value for its ownership” of that chain.

The sales process is expected to be completed in late September, according to Hostmore, and the holding company anticipates it will be delisted and wound up when the sale is concluded. TGI Friday’s in the UK would operate under new ownership, it added.

Hostmore declined to comment further while TGI Friday’s and owner TriArtisan Capital Advisors, didn’t respond to a request for comment. 

Hostmore and TGI Friday’s reached a nonbinding all-stock deal in April which was expected to give an £177 million ($220 million) enterprise value to the chain, which has locations in some 50 countries. But in August, Hostmore announced plans to sell both its own stores and TGI Friday’s. It also said then that a targeted third-quarter deal closing of their combination likely wouldn’t happen. 

Before Monday’s stock plunge, Hostmore shares had fallen by nearly half since April’s deal announcement.

Last week’s move to strip TGI Friday’s from managing a $375 million asset-backed security “compromises the control over the royalty stream of TGI Fridays and also potentially impairs the future revenue of the business,” Hostmore said Monday. “The predictable and highly cash generative royalty stream of TGI Fridays was the primary attractive feature for the group in pursuing the acquisition.”

S&P Global Ratings said last week that the manager-termination notice filed in regards to the ABS was prompted by, among other things, a miscalculation that resulted in a $2 million overpayment to TGI Friday’s that wasn’t recoverable.

More stories like this are available on bloomberg.com

©2024 Bloomberg L.P.