TGI Fridays’ agreement to be acquired by U.K.-based franchisee Hostmore plc is apparently far from a done deal.
Hostmore in an update this week said the transaction has been delayed due to a significant change in plans: The company and TGI Fridays U.S. are working to sell their remaining corporate stores and go fully franchised, a move that will impact the terms and timing of the proposed acquisition.
The Hostmore-Fridays deal was originally expected to close this quarter. A new timeline was not provided.
Hostmore also revealed that its board is working with advisers to “evaluate other potential options to secure value” if the acquisition falls through, suggesting that it remains a question mark.
Hostmore in April announced plans to buy the larger, U.S.-based franchisor in a deal valued at $220 million. It would create a global network of nearly 600 TGI Fridays restaurants in 44 countries.
As part of the deal, the companies had agreed to refinance their debt. But on Tuesday, Hostmore proposed a different plan for addressing that debt. It and Fridays U.S. will sell their corporate locations—87 for Hostmore and 92 for Fridays—to franchisees and use proceeds from the sale to pay down debt.
The plan is already underway. A “substantial portion” of the two companies’ corporate locations have already been sold to new and existing franchisees for a total of nearly $40 million, Hostmore said.
Transitioning to a fully franchised model will be more cost-effective and better for shareholders, the company said. But it will also take longer to complete than the traditional refinancing process that had been part of the original plan.
The two sides “continue to work closely and collaboratively towards a positive result, as the Boards of both businesses believe that the Acquisition is the optimal outcome for both sets of shareholders,” Hostmore said.
TGI Fridays has been owned by TriArtisan Capital Advisors since 2014. TriArtisan had been working to sell the chain for years after a deal to take it public by merging with a special purpose acquisition company fell apart in 2020.
Hostmore offered it an opportunity to exit, while also pairing Fridays with a like-minded owner at a time when the brand is struggling both at home and in the U.K.
For the first half of the year, Hostmore reported a same-store sales decline of 10%. That included a 20% decline in the second half of June, which the company attributed to the Euros football tournament and unseasonably warm weather.
Recent data on TGI Fridays U.S. business was unavailable, but systemwide sales fell 18% last year as the chain closed nearly 60 restaurants, according to Technomic.
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