The parent company of TGI Fridays in Britain is on the brink of collapse after a deal to acquire the American owner of the restaurant brand fell apart.
TGI Fridays Inc, of the United States, had agreed to be taken over by Hostmore, the owner of the UK operation, but the termination of an American corporate securitisation has scuppered the marriage.
The trustee of the securitisation is the entity that holds legal title to the franchise agreement royalties and other fees and revenues, but the trustee is now set to terminate the US group’s management of that securitisation.
Hostmore said the termination of the funding “compromises the control over the royalty stream of TGI Fridays and also potentially impairs the future revenue of the business”.
However, the British company said that a separate sale of its 87 corporate stores had produced “a long list of potential acquiring parties” and several bids had been put on the table. The group said it was assessing these offers and was pushing for the leading bidders to improve their proposals.
Failing a last-minute revival of the marriage of the two TGI Fridays businesses, shareholders of Hostmore look likely to be wiped out amid “present indications” that the proceeds for the store sale will be “lower than the par value of the borrowings currently secured by the group’s trading subsidiary, Thursdays UK”.
It said that, as a result, it was “unlikely that the equity owner of Thursdays will recover any meaningful value for its ownership” and it was the board’s expectation that Hostmore would be “wound up and delisted, contemporaneous with the conclusion of the sale process”.
While a stores sale would enable the Fridays brand to continue under new ownership, news of the imminent demise of Hostmore sent the shares down by more than 8½p, or 90.8 per cent, to close at less than a penny, valuing the company at about £1.4 million.
The complex web of transactions would have turned the merged Anglo-American TGI Fridays into a wholly asset-light, fully franchised business model with a portfolio, before the start of the crisis, of 179 sites.
The rapid fall from grace of Hostmore is bound to result in questions over how a company that was demerged from Electra Private Equity in November 2021 at 147p can have been brought to its knees at such a rapid rate of knots. Even the chief executive of Hostmore, Julie McEwan, 58, appears to been unaware of what was happening, having acquired 45,771 shares as recently as August 30. She acquired ordinary shares of 20p each for a price of 10p per share. The purchase lifted her total holding to 800,000 shares.
In recent months Hostmore has endured a rollercoaster existence on the stock market, punctuated by profit warnings and changes of senior management.
When Alan Stillman opened the first TGI Fridays in 1965 in New York, it promised: “In here, it’s always Friday.” Inspired by the Barnum & Bailey circus, with an ambition to put on the “greatest show on earth”, its bartenders became famous for their cocktails and the way in which they mixed them, although Stillman’s real reason for launching the bar was to meet the airline stewardesses, fashion models and secretaries who lived in the neighbourhood.