Privately held TGIF Holdings LLC and Allegro Merger Corp., a special purpose acquisition company, have signed an agreement that would take the casual-dining chain public, the companies announced Friday.
The Dallas-based parent of the TGI Fridays and New York-based Allegro Merger, said that, at closing, TGI Friday’s holders will receive a combination of cash and stock valued at $30 million and Allegro will assume about $350 million of net debt.
The majority owners of TGI Fridays are TriArtisan Capital Advisors LLC, expects to exchange a majority of its ownership in the TGI Fridays business for shares of Allegro, and MFP Partners L.P., led by Michael F. Price, which intends to exchange all of its ownership in the TGI Fridays business for shares of Allegro.
Ray Blanchette, CEO of TGI Fridays, said in a statement that his first order of business when he joined in the company in October 2018 was to hire management team.
“This transaction is the next significant strategic move,” Blanchette said, “and will allow us to gain public company status and access incremental equity capital to accelerate the rejuvenation of this iconic global brand.”
TGI Fridays' existing holders may receive an additional two million shares of Allegro common stock contingent upon achievement of specified post-closing performance metrics of the business. The pro forma valuation of the combined business, assuming a $10.16 stock price, represents a relative discount to comparable publicly traded dining concepts.
Friday’s has about 840 restaurants, with more than half of those franchised and licensed internationally. The company said 83% of its restaurant are franchised.
The brand was founded in 1965. Of the 396 domestic restaurants, 144 are company owned.
The company went through a refranchising program in 2014 after it was sold by Minneapolis-based Carlson to Sentinel Capital Partners and TriArtisan Capital Partners for an estimated $800 million.
The company said systemwide sales for the 12 months ended Sept. 30 were about $2 billion and the average annual unit volume was about $2.7 million.
In the past year, Blanchette brought John Neitzel and Jim Mazany back to Fridays to run franchising and company stores, respectively.
“With these additions to the management team and the new operating plan in place, we believe Fridays is poised to regain its position as a leader in the bar and grill space,” the company said.
TGI Friday’s and Allegro’s boards have unanimously approved the merger agreement and Allegro’s board has recommended its stockholders approve the transaction.
Allegro intends to hold a shareholders meeting to extend the investment period of the special-purpose company to March 31, 2020, following which it will call and convene a special meeting of shareholders to approve the business combination and related matters. The business combination is expected to close in the first quarter of 2020.
“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. “Fridays’ highly predictable stream of franchise and licensing revenue is very attractive and we believe that Fridays provides a compelling value to our shareholders.”
Rohit Manocha, managing director and co-founder of TriArtisan, said, “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.”
For the purposes of this transaction, Allegro is represented by Graubard Miller and TGIF is represented by Ropes & Gray LLP. Cantor Fitzgerald and Piper Jaffray & Co. are acting as capital market advisers to Allegro.
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