Hostmore in talks to acquire TGI Fridays for £177m

Hostmore, the parent company of TGI Fridays in the UK, has agreed to a proposed all-share acquisition of the American-themed casual dining brand for £177m.

The terms of the sale value TGI Fridays at approximately 5.4 times its FY23 underlying earnings before interest, taxes, depreciation and amortisation, which Hostmore said was "highly attractive".

The agreement would result in existing Hostmore shareholders receiving a 36% stake in the enlarged business, with TGI Fridays shareholders taking 64%.

It would also lead to a significant increase in the combined group's footprint, with 404 franchised and 189 company-operated stores across 44 countries.

The move is being dubbed a "reverse takeover" by the Financial Conduct Authority because the "transformational combination" brings together TGI Fridays' largest franchisee with its global franchisor.

Stephen Welker, chairman of Hostmore, said: "I am pleased to announce that we are in advanced discussions with TGI Fridays on the terms of a proposed transaction, which would reunite two businesses that are a natural fit, and were one business until as recently as 2014.

"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, added: "Bringing together TGI Fridays with our leading franchisee partner in Hostmore, in our largest international market, the UK, has a compelling and highly complementary strategic logic to it.

"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. I look forward to the prospect of working with the teams at Hostmore as a part of a new ownership structure, to ensure we keep delivering ‘That Fridays Feeling' that our guests across the world know and love."

As well as being TGI Fridays' largest franchisee globally, Hostmore operates fast-casual dining brand Fridays and Go, which forms part of the group's portfolio of 89 stores across the UK.

In September last year, Hostmore revealed it plans to delay new restaurant openings until 2025 as part of a cost reduction programme.

The proposed transaction is currently being negotiated.