The blockbuster merger is off the table.
Due to the uncertainty of COVID-19, Allegro Merger Corp. and TGI Fridays mutually agreed to cancel their $380 million merger, according to an SEC filing.
The filing said the deal was canceled “due to extraordinary market conditions and the failure to meet necessary closing conditions.”
Allegro, a shell company, said shareholders approved an amendment to the charter to extend the deadline for the merger from March 31 to April 30, but the company declined to do so.
The company has ceased operations except for “winding up its affairs” and returning funds to shareholders.
In November, Allegro and TGI Fridays inked a business combination transaction, or merger, that would result in TGI Fridays becoming a publicly listed company. TGIF’s holders were supposed to receive a combination of cash and stock valued at $30 million and Allegro was to assume about $350 million of net debt.
TGIF is owned by firms TriArtisan Capital Advisors and Holder MFP Partners. TriArtisan Capital was expected to exchange a majority of ownership for shares of Allegro while MFP Partners planned to exchange all of its ownership for shares of Allegro.
The casual-dining chain, founded in 1965, has more than 370 locations in the U.S. and more than 440 internationally.
In 2014, Carlson Restaurants sold TGI Fridays to TriArtisan and Sentinel Partners for more than $800 million. It has been privately held since merging with Carlson 30 years ago.
The brand has experienced issues with sales and traffic in recent years. In Q4 2019, traffic fell -5.9 percent at corporate stores, 11.4 percent at franchises and 9.1 percent systemwide.
In terms of sales, Q4 comps dropped 9.4 percent at corporate stores, 12.8 percent at franchises, and 1.3 percent systemwide.
Before the defunct merger, TGIF was in the midst of a multi-year comeback effort. It’s main goals were to improve profits by 1,000 basis points, grow AUV by $1 million, triple the size of active rewards members and increase frequency by at least 25 percent; enhance guest satisfaction scores 20 percent; and get recognized as one of the best places to work with annual turnover sub-100 percent.
To realize those goals, TGIF has worked on a multitude of initiatives, including the hiring of CEO Ray Blanchette, acquiring franchises, replacing directors of operations and general managers, emphasizing the bar, providing differentiated value, growing off-premises business, and rewarding loyalty customers and employees.
There were signs of life. Midway through Q1, traffic grew 2.3 percent at corporate stores, fell 4 percent at franchises, and dropped just 1.3 percent systemwide. As for same-store sales, corporate units slid only 1.9 percent, while franchises decreased 5.2 percent and stores systemwide fell 3.7 percent. Off-premises has grown to 13 percent of sales; delivery increased 140 percent in 2019. Revenue stood at $426 million, up from $293.1 million in 2018. Prior to the pandemic, revenue was projected to increase to $557.6 million.
It remains to be seen how the failed merger will affect the brand’s trajectory.