TGI Fridays will now have capital to grow, the company said.
TGI Fridays is about to go public. TGIF Holdings, LLC and Allegro Merger Corp. announced Friday in a joint statement they’ve signed a definitive agreement for “a business combination transaction.” The deal would result in TGI Fridays becoming a publicly listed company.
Allegro is a publicly traded special purpose acquisition group.
At closing, TGIF’s holders will receive a combination of cash and stock valued at $30 million. Allegro will assume roughly $350 million of net debt.
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The majority owners of TGIF, funds managed by TriArtisan Capital Advisors LLC, expect to exchange a majority of their ownership in the business for shares of Allegro. Holder MFP Partners, L.P., led by Michael Price, plans to exchange all of its ownership for shares of Allegro as well.
TGIF’s existing holders may receive an additional two million shares of Allegro common stock contingent upon achievement of certain post-closing metrics of the business, the company said. It didn't disclose what those benchmarks were.
The pro forma valuation of the combined business, assuming a $10.16 stock price, represents a relative discount to comparable publicly traded dining concepts. The company said the deal would delever its balance sheet and provide TGI Fridays with capital to fund future growth.
TGI Fridays has about 840 restaurants, but more than half are located outside the U.S. Currently, 83 percent of its units are franchised and franchising and licensing account for more than 70 percent of total profitability.
Founded in 1965 as a single New York City restaurant, the chain has 396 domestic units (144 company run and 252 franchised). Systemwide sales for the 12-month period that ended September 30 were about $2 billion. Average annual unit volume was $2.7 million.
TGI Fridays has made its share of changes lately. CEO Ray Blanchette, a 19-year company veteran who previously helmed Ignite Restaurant Group, was hired in October 2018 after nine months as CEO of Ruby Tuesday. He succeeded Aslam Khan, a TGI Fridays franchisee.
Blanchette founded Ignite as a holding company for casual-dining brands, bringing on Joe’s Crab Shack and Brickhouse Tavern + Tap. But the company struggled to gain footing after acquiring Romano’s Macaroni Grill and filed for bankruptcy in 2017. Two years after buying the Italian chain for $55 million, it sold it for $8 million.
Before, Blanchette was president and COO of Carlson Restaurants Worldwide, then the parent company of TGI Fridays. He started his career with the casual chain, working a variety of roles for 18 years. He also held the CEO title at fast casual Au Bon Pain for 20 months, a run that culminated with the chain’s sale to JAB Holding Company. He took the Ruby Tuesday job shortly after.
Since joining TGI Fridays, Blanchette bought on John Neitzel and Jim Mazany to run franchising and company stores, respectively.
Carlson sold TGI Fridays to Sentinel Capital Partners and TriArtisan Capital Partners for $800 million in 2014. Carlson bought the brand a decade after it was started, when it had just 11 stores.
“The first order of business when I took over this company was to bring in the best talent to improve operations and innovation,” Blanchette said in a statement. “This transaction is the next significant strategic move, and will allow us to gain public company status and access incremental equity capital to accelerate the rejuvenation of this iconic global brand." It appears from the release he will remain CEO.
TGIF and Allegro’s board of directors unanimous approved the merger agreement and recommended stockholders to do so.
“Allegro’s board and I believe that Fridays is an unparalleled iconic international brand and we are excited to be able to bring this opportunity to our shareholders,” said Eric Rosenfeld, Allegro’s CEO, in a statement. “Fridays’ highly predictable stream of franchise and licensing revenue is very attractive and we believe that Fridays provides a compelling value to our shareholders."
Added Rohit Manocha, managing director and co-founder of TriArtisan: “TGI Fridays is a global, iconic brand with a top tier, highly engaged management team. Coupled with the right capital structure, we believe the brand is ideally positioned to take advantage of the rising demands of our guests. TGI Fridays’ bar heritage is unique and creates a point of distinction in this mature segment of casual dining.”