REG - Hostmore PLC - Proposed All-Share Acquisition of TGI Fridays, Inc

HostmoreAnnouncement

16/04/2024 07:00

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RNS Number : 7283K  Hostmore PLC  16 April 2024

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AN ANNOUNCEMENT AND NOT A CIRCULAR OR PROSPECTUS OR EQUIVALENT DOCUMENT AND
INVESTORS AND PROSPECTIVE INVESTORS SHOULD NOT MAKE ANY INVESTMENT DECISION ON
THE BASIS OF ITS CONTENTS. A PROSPECTUS AND CIRCULAR IN RELATION TO THE
TRANSACTION DESCRIBED IN THIS ANNOUNCEMENT MAY BE PUBLISHED IN DUE COURSE.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

FOR IMMEDIATE RELEASE

 

16 April 2024

 

 

Hostmore plc

 

Heads of terms agreed regarding a proposed all-share acquisition of TGI
Fridays, Inc.

 

Transformational combination would bring together TGI Fridays' largest
franchisee with the global franchisor

 

Hostmore shareholders expected to benefit from the improved operating model of
the Combined Group and the stronger valuation multiples typically ascribed to
global franchisor businesses

 

Hostmore plc ("Hostmore" or the "Company") announces that it has reached
agreement on a non-binding basis for a proposed all-share acquisition of TGI
Fridays, Inc. (including affiliates, "TGI Fridays") (the "Proposed
Transaction"). TGI Fridays is the global hospitality business that owns the
American-themed casual dining brand "TGI Fridays" which is the Company's
franchisor. TGI Fridays primarily operates through franchising and licensing
agreements in the US and in 43 international markets. It also operates a
network of company-owned stores in the US.

 

The parties have agreed that the Proposed Transaction would result in existing
Hostmore shareholders holding a 36% shareholding in the enlarged business upon
completion (the "Combined Group"), with TGI Fridays shareholders holding a 64%
shareholding in the Combined Group.

 

The Proposed Transaction is being negotiated on an exclusive basis and is
subject to, among other things, completion of confirmatory due diligence and
the parties entering into binding transaction documentation. The Proposed
Transaction would be classified as a Reverse Takeover under the Listing Rules
of the Financial Conduct Authority ("FCA") and therefore would be conditional
upon the approval of an ordinary resolution by existing Hostmore shareholders.
Should the parties enter into binding transaction documentation, a summary of
the material terms and conditions of such documentation will be set out in a
further announcement in due course.

 

Highlights of the Proposed Transaction include:

·      TGI Fridays is expected to be purchased for an enterprise value
of £177 million, or approximately 5.4x TGI Fridays' FY23 underlying EBITDA,
representing a highly attractive acquisition multiple for a large, established
global franchisor

·      The Combined Group would have had underlying FY23 revenue of
approximately £490 million, an approximately 9% EBITDA margin, and Free Cash
Flow of more than £30 million

·      Hostmore shareholders would benefit from a material shareholding
in the capital-light franchise and licensing fee business of the Combined
Group, which achieves high margins and strong cash flow conversion

·      Similar London and internationally listed franchisor businesses
currently trade at an enterprise valuation multiple averaging 14x EBITDA,
representing a significant re-rating opportunity for Hostmore shareholders

·      Combined Group would have significantly increased scale, as well
as improved strategic, operational, and financial flexibility

·      Increased stability of earnings and cash flow of the Combined
Group would be expected from diversified business channels and geographies

·      Combined Group expected to continue utilising Hostmore's revised
capital allocation policy framework set out in May 2023, prioritising debt
reduction and shareholder returns

·      Hostmore governance structure expected to be utilised for the
Combined Group, with Chairman, Senior Independent Director, and Board
Committee chairs continuing in same roles after completion

·      Combined Group expected to be renamed "TGI Fridays plc", with its
shares admitted to trading on the London Stock Exchange's Main Market under
the share ticker "TGIF"

·      Combined prospectus and shareholder circular currently expected
to be published in Q3 2024, with shareholder vote and completion of the
Proposed Transaction by the end of Q3 2024

 

The financials below represent underlying, adjusted figures for both TGI
Fridays and Hostmore with full details of the adjustments made detailed in
Appendix 1 and Appendix 2.

 

Composition of Combined Group:

 

 FY 2023                             TGI Fridays  Hostmore

 (Financials in £ millions)
 Revenue                             306          191
 EBITDA                              33           12
                  EBITDA Margin      11%          6%

 Operating Cash Flow                 36           12
 Capital Expenditures                12           5
                  Free Cash Flow     25           7

 Net Debt                            134          25
                  Net Debt / EBITDA  4.1x         2.1x

 Corporate Stores                    100          89
 Franchised Stores                   493          -
                  Total Stores       593          89

 Employees                           4,447        4,380

 

 

Combined Group by Business Segment:

 

                                   TGI Fridays
 FY 2023                           Franchise & Licensing Fees      Corporate Stores  Group Marketing & Central Costs      Group      Hostmore

 (Financials in £ millions)
 Stores                            493                             100               -                                    593        89

 Revenue                           48                              258               -                                    306        191
 Segment EBITDA                    31                              16                (14)                                 33         12
                  EBITDA Margin    66%                             6%                -                                    11%        6%

 

 

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.

 

Hostmore has made good progress in executing its turnaround strategy over the
past year by reducing costs, revising our capital allocation policy to focus
on debt repayment and shareholder distributions, and pursuing high ROI organic
growth initiatives. I want to thank Julie McEwan, our CEO, Matthew Bibby, our
CFO, and their colleagues, both in store and at executive levels, for their
tireless efforts to put Hostmore in a stronger position which has led to the
possibility of this compelling strategic transaction.

 

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, said: "Today marks an exciting moment
for the next chapter of the TGI Fridays story, as we continue to drive forward
our brand revitalisation strategy. Bringing together TGI Fridays with our
leading franchisee partner in Hostmore, in our largest international market,
the United Kingdom, has a compelling and highly complementary strategic logic
to it.

 

Our two companies share close ties and have a longstanding, excellent working
relationship and mutual respect. A combined group would stand to gain from our
focused efforts with the benefit of greater combined scale, efficiencies and
flexibility.

 

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."

 

 

Further Information

 

About Hostmore

·      Hostmore is a UK hospitality business with its current operations
focused on the American-themed casual dining brand, 'TGI Fridays', and the
fast casual dining brand, 'Fridays and Go'

·      Hostmore is TGI Fridays' largest franchisee globally, with a
successful track record in TGI Fridays' largest international market

·      The Company operates 89 stores across the UK and has
approximately 4,380 employees

 

About TGI Fridays

·      TGI Fridays is a global hospitality business focused on the
American-themed casual dining brand of 'TGI Fridays', with the first TGI
Fridays store opened in 1965 at 63(rd) Street and 1(st) Avenue in Manhattan

·      TGI Fridays is an iconic American brand with global recognition
and a loyal customer base, with stores in 30 US states and 43 other countries

·      TGI Fridays is the master franchisor to 493 franchised stores,
with 128 located in the US, 89 in the UK (the Hostmore portfolio), and 276
across a further 42 countries. It has 4,447 employees

·      The TGI Fridays group operates 100 US company-operated stores,
with a focus on the highest quality stores and locations

·      FY23 total global systemwide restaurant sales of $1.4 billion,
comprising $672 million in the US and $708 million in international markets.
In addition, there were $67 million of Consumer Packaged Goods ("CPG")
licensing sales

·      Underlying FY23 revenue was $381 million and EBITDA was $41
million

·      Licensing retail sales of branded 'TGI Fridays' products - the
CPG business offers a large breadth of TGI Fridays' most iconic in-store
offerings and has reached 100k+ retail end doors

·      TGI Fridays has developed a substantial off-premise and delivery
platform through its website and proprietary app, as well as partnerships with
third-party delivery service providers

·      TGI Fridays has been majority-owned by funds managed by
TriArtisan Capital Advisors LLC or its predecessors ("TriArtisan") since 2014

 

About TriArtisan

·      TriArtisan was formed in 2002 and it invests and manages private
equity capital provided by a broad roster of institutions including sovereign
wealth funds, alternative asset managers, and family offices

·      TriArtisan is a long-standing and successful investor in the
restaurant sector, with current investments in PF Changs, Hooters, and 3C,
alongside TGI Fridays

 

 

Compelling strategic and financial rationale for both companies

 

The key benefits of the Proposed Transaction to both sets of shareholders
would include:

 

The Combined Group would benefit from a significant increase in operational
and financial scale

·      Significant expansion in the Combined Group's footprint, with 404
franchised and 189 company-operated stores, across 44 countries

·      The acquisition of TGI Fridays would materially increase the
scale of Hostmore, with TGI Fridays having FY23 global systemwide restaurant
sales of $1.4 billion and benefiting from the predictable and high margin
revenue of the franchised stores

 

Improved strategic, operational, and financial flexibility with scope for
synergies

·      Expected improved cash generation of the Combined Group would
facilitate capital deployment into the operating business and the potential
for an acceleration of shareholder returns as part of a disciplined capital
allocation policy

·      Potential for cost synergies through rationalisation of
duplicative central costs and efficiencies in sourcing, operations and
marketing

·      The Proposed Transaction would eliminate the restrictions on
Hostmore arising from its franchise agreement with TGI Fridays and would give
the Combined Group greater flexibility and autonomy to pursue its strategic
priorities

·      Combination of UK and US-owned store business and shared
management for the Combined Group would enable improved sharing of know-how
across the US and UK markets

 

Attractive capital light franchise and licensing fee businesses in addition to
owned stores

·      TGI Fridays' 493 franchise stores operated by 57 franchisees
comprise 83% of the overall store base

·      Franchisee royalties are a predictable, recurring revenue stream
with an innately high margin and high cash flow conversion

·      Well-capitalised franchisee base who are strong operators with
resources to grow

·      Well-developed consumer products licensing business with
incremental growth potential outside of the US

·      Existing pipeline of new product offerings being introduced to
drive continued growth

 

TGI Fridays has developed a substantial off-premise and delivery platform to
drive incremental sales and reach new customers

·      Off-premise sales driven through TGI Fridays' website and through
partnerships with third-party delivery service providers

·      Total off-premise sales comprise c.25% of total sales with c.40%
through TGI Fridays' proprietary channels in FY23

·      Provides a potential new growth lever through increasing customer
numbers and margin enhancement

 

Improved access to capital and stable long-term financing

·      The Combined Group would be larger and more diverse providing
improved access to capital

·      This would provide the Combined Group with flexible long-term
financing

·      TGI Fridays is undergoing a refinancing with new lenders, which
is expected to be completed on or before the date of the Proposed Transaction
completing

·      A part of TGI Fridays' strategy is to monetise certain ancillary
licensing assets to substantially reduce its debt

 

Financial highlights of TGI Fridays

·      TGI Fridays FY23 total underlying revenue was $381 million, with
$321 million from company-operated stores, $29 million from US franchised
stores, $28 million from international franchised stores, and $3 million from
licensing and sourcing

·      TGI Fridays FY23 segment underlying EBITDA was $19 million from
company-operated stores, $12 million from US franchised stores, $24 million
from international franchised stores, and $3 million from licensing and
sourcing

·      After group marketing and central costs, FY23 underlying EBITDA
was $41 million

·      TGI Fridays FY23 underlying Free Cash Flow was $31 million, with
Free Cash Flow Conversion of 75%

 

 

Key terms of the Proposed Transaction

·      The Combined Group would be chaired by Stephen Welker, Hostmore's
Chairman, who has noted his intention to retire from the Board at the 2025
Annual General Meeting ("AGM"), subject to the completion of the Proposed
Transaction. Rohit Manocha, Co-Founder of TriArtisan, would become
Chairman-designate on the completion of the Proposed Transaction and become
non-executive Chairman of the Combined Group at the conclusion of the 2025 AGM

·      Other non-executive directors of the Combined Group are currently
expected to be:

o  David Lis - Senior Independent Director (current Hostmore Senior
Independent Director)

o  Andrew Blurton - Audit and Risk Committee Chair (current Hostmore Audit
and Risk Committee Chair)

o  Helena Feltham - Remuneration Committee Chair (current Hostmore
Remuneration Committee Chair)

o  Anil Yadav - TriArtisan investor in TGI Fridays and a significant
franchisee

o  Two other representatives nominated by TGI Fridays

·      The Combined Group would be led by Weldon Spangler as Chief
Executive Officer and Nik Rupp as Chief Financial Officer, presently being in
the same roles at TGI Fridays

·      Julie McEwan and Matthew Bibby would continue as Chief Executive
Officer and Chief Financial Officer, respectively, of the UK business. Mr.
Bibby would have the additional role of Head of Investor Relations for the
Combined Group

·      The Proposed Transaction would be consistent with Hostmore's
existing strategy to prioritise debt reduction and shareholder returns.
Combining Hostmore and TGI Fridays, two highly complementary businesses with
significantly enhanced scale and committed long term funding, would accelerate
this strategy and is expected to provide the opportunity for greater
shareholder distributions

·      Upon completion of the Proposed Transaction, it is anticipated
that Hostmore shareholders would own 36% and TGI Fridays shareholders would
own 64% of the Combined Group

·      Combined Group expected to be renamed "TGI Fridays plc", and
would have its shares re-admitted to trading on the London Stock Exchange's
Main Market under the share ticker "TGIF"

 

Conditionality and timing to Completion

·      The Proposed Transaction is subject to, among other things,
completion of confirmatory due diligence and the parties entering into binding
transaction documentation

·      The Proposed Transaction would be classed as a Reverse Takeover
under the Listing Rules of the FCA and accordingly would be conditional,
amongst other things, on the approval of existing Hostmore's shareholders, by
ordinary resolution, at a general meeting of Hostmore (the "General Meeting")

·      The Proposed Transaction would result in TriArtisan, MFP Partners
and certain other existing TGI Fridays shareholders ultimately holding an
aggregate interest equal to more than 60% of the total voting rights of the
Combined Group. The parties anticipate that the Proposed Transaction would,
therefore, be conditional on a Rule 9 whitewash waiver in order to disapply
mandatory offer requirements

·      TriArtisan and MFP Partners, TGI Fridays' current principal
owners, would enter into a relationship agreement with the Combined Group to
govern the continuing relationship between the parties following completion of
the Proposed Transaction

·      The listing of Hostmore's ordinary shares on the premium listing
segment of the Official List would be cancelled upon completion. Applications
would be made to the FCA for the ordinary shares to be re-admitted to the
premium listing segment of the Official List (or its successor should the
FCA's listing reforms have been implemented by Completion) and to the London
Stock Exchange to be re-admitted to trading on the main market for listed
securities ("Re-admission"). Re-admission would be expected to occur
immediately following (or as soon as practicable after) Completion

·      Should the Proposed Transaction be agreed, Hostmore would expect
to publish a combined circular and prospectus for the Proposed Transaction,
including the notice of General Meeting (the "Combined Circular and
Prospectus") in Q3 2024. The Hostmore and TGI Fridays financial information
presented in the Combined Circular and Prospectus will be audited and shown in
IFRS and in line with Hostmore's accounting policies

·      Completion would be expected to occur during Q3 2024, subject to
the satisfaction of all conditions, including, but not limited to, shareholder
approval and any necessary regulatory approvals

 

Trading Update for Hostmore

·      Preliminary financial results for Q1 2024 are as follows:

o  Revenue, on a like-for-like ("LFL") basis versus Q1 2024, declined by 7%,
due principally to reduced consumer demand across the sector

o  Despite the revenue decline, unadjusted FRS102 EBITDA in the quarter was
£0.3 million, representing an improvement of £3.2 million on Q1 2023. Each
month of the quarter showed increased improvement versus the prior year, with
March 2024 being £1.8 million ahead of the same period in FY23

o  Consolidated net bank debt at the quarter-end was £26.1 million, in line
with expected seasonality and consistent with the forecasted position for the
end of fiscal year 2024

·      Guest sentiment scores continue to improve following a renewed
focus on the guest experience initiated during FY23

·      Preliminary testing of Hostmore's direct-to-consumer organic
growth initiative was commenced, focusing on maximising the efficiency and
effectiveness of the loyalty app and email database in driving repeat customer
visits

·      The Company is in the process of negotiating a restated bank
facility agreement with its lending banks, to extend the maturity date to 1
January 2026 from 1 January 2025

·      The Company expects to publish its FY23 preliminary results by
the end of April

 

Trading Update for TGI Fridays

·      Q1 2024 systemwide restaurant sales were £247 million, a decline
of £31 million versus the same period in FY23

·      Underlying revenue for the Franchise & Licensing segment for
Q1 2024 was £9 million

o  International franchise revenue was £5 million, broadly flat on the prior
year

o  US franchise revenue was £3 million, £1 million below prior year for
royalty and fees, primarily as a result of store closures and weaker consumer
demand across the sector, and £2 million decrease in pass-through franchisee
marketing contribution

o  Licensing revenue was less than £1 million and remained flat for Q1 2024
as compared to the same period in FY23

·      Underlying revenue for the US Corporate Stores for Q1 2024 was
approximately £57 million

o  LFL revenue declined by 23%, due principally to reduced consumer demand
across the sector and heavy promotional spend and discounting by key
competitors, however there were month on month improvements throughout the
quarter

·      The focus on guest experience has had a marked effect on guest
sentiment in the US, with Q1 2024 scores showing significant improvement over
Q4 2023

·      Underlying EBITDA in the quarter was £7 million

 

Enquiries

 

Hostmore

Stephen Welker, Chairman

Matthew Bibby, Chief Financial Officer

Tel: +44 (0)33 0460 5588

Email: enquiries@Hostmoregroup.com (mailto:enquiries@hostmoregroup.com)

 

Deutsche Numis (Financial Adviser to Hostmore)

Stuart Dickson

Alec Pratt

Jonny Abbott

Jack McLaren

Tel: +44 (0)20 7260 1000

 

Dentons Global Advisors (Public Relations Adviser to Hostmore)

Jonathon Brill

James Styles

Tel: +44 (0)20 7664 5095

Email: Hostmore@dentonsglobaladvisors.com
(mailto:Hostmore@dentonsglobaladvisors.com)

 

TGI Fridays

Weldon Spangler, Chief Executive Officer

Nik Rupp, Chief Financial Officer

Dishen Patel, Chief Implementation Officer

Tel: +1 (972) 662-5400

 

TriArtisan

Rohit Manocha Co-Founder and Managing Director

Michael Prescott, Vice President

Tel: +1 (212) 609-0620

 

Global Leisure Partners (Financial Adviser to TGI Fridays)

Mark Harms

Simon Dunn

Tel: +44 (0)20 7016 8050

 

RF Binder (Public Relations Adviser to TGI Fridays)

Atalanta Rafferty

Jim Furrer

Tel: +1 (212) 994-7600 (tel:12129947600)

Email: TGIFridays@rfbinder.com (mailto:TGIFridays@rfbinder.com)

 

 

 

 

 

Appendix I - Additional Financial Information

 

Summary unaudited US GAAP financial information for TGI Fridays

 

The TGI Fridays 2023 unaudited Financial Statements reflect the results of
operations, financial position, cash flows, capital expenditure and net debt
of the business in conformity with US GAAP.

 

 $ million                   Year ended 31 December 2023
 US GAAP

 Revenue                     502
 EBITDA                      39
 Net income                  (33)

 Operating cash flow         40
 Capex                       14
 Free Cash Flow              26

 Net Debt                    294

 

The revenue and EBITDA provided in the TGI Fridays 2023 Financial Statements
reflect the perimeter of the Transaction with the exception of the store
closures / refranchisings, divestitures and cost savings, which as detailed
below have, or are expected to be, implemented since 25 December 2023.

 

The financial information on TGI Fridays in this announcement is provided for
background information only and has not been independently verified by
Hostmore.

 

Summary unaudited financial information adjusted for the transaction perimeter

 

The revenue, EBITDA and Free Cash Flow figures derived from the TGI Fridays
2023 unaudited Financial Statements are not adjusted for:

(i)    Approximately $121 million decrease in revenue related to the
closure of 50 underperforming company-owned units, closed between January 2023
and April 2024 (during Q1 2024 36 loss-making stores were closed, representing
an aggregate $11.5 million loss during 2023), the annualised effect of the
refranchising of 8 company-owned units, as well as the divestiture of certain
ancillary licensing assets of TGI Fridays. These closures were part of TGI
Fridays' ongoing strategy to streamline the store portfolio and field
operations to focus on its highest performing and most profitable units. The
divestiture discussions are at an advanced stage

(ii)    Approximately $2 million increase in EBITDA related to the
combination of: a rationalisation of G&A expenses within the corporate
headquarters and field operations, in addition to the savings from the closure
of the underperforming units, which in aggregate more than offsets the
reduction in EBITDA from the divestiture of the licensing assets

(iii)   Approximately $5 million increase in cash flow which reflects the
reduction in capital expenditure and cash generation of the resultant business
after the closures and divestitures

(iv)   The monetisation of the licensing assets is expected to facilitate an
ongoing reduction in TGI Fridays outstanding debt and an ongoing refinancing
of the remaining debt on attractive terms

 

The tables below show underlying revenue, underlying EBITDA and underlying
Free Cash Flow if these unaudited adjustments had been made to the reported
2023 revenue, EBITDA and Free Cash Flow. This financial information is
provided for background information only and does not represent the final
numbers that will be reported in the Combined Circular and Prospectus under
IFRS and Hostmore's accounting policies.

 

 

 $ million                      Year ended 31 December 2023
 US GAAP
 Revenue (US GAAP)                       502
 Adjustments                             (121)
 Underlying Revenue                      381

 EBITDA (US GAAP)                        39
 Adjustments                             2
 Underlying EBITDA                       41

 Operating cash flow (US GAAP)           40
 Capex (US GAAP)                         14
 Adjustments                             5
 Underlying Free Cash Flow               31

 

 

In accordance with the Listing Rules, the Combined Circular and Prospectus
when published will include full audited historic three year financial
information on TGI Fridays prepared in accordance with IFRS, in a form
consistent with the accounting policies adopted by Hostmore in its own annual
consolidated financial statements. Such IFRS financial information will differ
from the unaudited financial information on TGI Fridays set out above.

 

Unaudited statutory financial information on Hostmore

 

The financial information below in relation to Hostmore has been extracted
from FRS102 unaudited management financial information for the year ended 31
December 2023.

 

 £ million                    Year ended 31 December 2023
 FRS102

 Revenue                      191
 EBITDA                       2

 Operating cash flow          2
 Capex                        5
 Free Cash Flow               (3)

 Net Debt                     25

 

 

Unaudited underlying financial information on Hostmore

 

The figures presented below are after receiving the full year benefit of
certain initiatives and disposals undertaken in FY23:

·      Normalised utility pricing

·      Full year benefit of cost reduction initiatives undertaken in
FY23

·      Full year benefit of sustaining prices at the levels at the end
of FY23

·      Full year benefit from closure of loss-making stores

·      Adjustment for one-off redundancy expenses

·      Full year cost if National Minimum Wage increase applied
throughout FY23

 

 £ million                    Year ended 31 December 2023
 FRS102

 Revenue                      191
 Underlying EBITDA            12

 Operating cash flow          12
 Capex                        5
 Free Cash Flow               7

 Net Debt                     25

 

 

 

 

Illustrative unaudited underlying financial information on the Transaction

 

 Year ended 31 December 2023          TGI Fridays                            Hostmore

                                      $ million US GAAP  £ million US GAAP   £ million FRS102

 Revenue                              381                306                 191
 EBITDA                               41                 33                  12

 Operating cash flow                  45                 36                  12
 Capex                                14                 12                  5
 Free Cash Flow                       31                 25                  7

 Net Debt                             171                134                 25

 

In accordance with the Listing Rules, the Circular and Prospectus when
published will include pro forma financial information on the Combined
Business prepared in accordance with IFRS. Such information will differ from
the illustrative information set out above.

 

Appendix 2 - Sources and Bases of Information

 

Unless otherwise stated in this announcement:

 

(1)   Free Cash Flow refers to operating cash flow (before the impact of
interest) after capital expenditure.

 

(2)   Free Cash Flow Conversion is defined as Free Cash Flow divided by
EBITDA.

 

(3)   References to EBITDA for Hostmore and TGI Friday's refer to an EBITDA
figure adjusted for certain non-underlying items.

 

(4)   Revenue, EBITDA, operating cash flow, Free Cash Flow, and Capex
figures presented in GBP where the original figure is in USD assume a 1.24
$/£ foreign exchange rate, which is the average exchange rate in 2023 from
Bloomberg.

 

(5)   Net debt and non-controlling interest figures presented in GBP where
the original figure is in USD assume a 1.27 $/£ foreign exchange rate from
Bloomberg as of 31 December 2023.

 

(6)   TGI Fridays Q1 figures presented in GBP where the original figure is
in USD assume a 1.27 $/£ foreign exchange rate from Bloomberg, which is an
average exchange rate from 1 January 2024 to 29 March 2024.

 

 

(7)   Hostmore's figures represent Hostmore's FY23 preliminary results,
shown in FRS 102; all figures are preliminary estimates and are unaudited.
They are also presented on an underlying basis assuming receiving the full
year benefit of certain initiatives and disposals undertaken in FY23 as
detailed in Appendix 1.

 

(8)   TGI Fridays' figures are preliminary estimates and are unaudited and
are subject to change following the conversion of TGI Fridays' results from
U.S. GAAP to IFRS and using IFRS-consistent accounting policies adopted by
Hostmore, among other factors. They also represent the continuing business
after expected divestment of certain ancillary licensing assets and the
closure or refranchising of 58 company-owned stores between 2023 and April
2024.

 

(9)   Any figures stated for the Combined Group are for illustrative
purposes, are based on FY23 accounts for TGI Fridays and Hostmore adjusted for
divestments and restructuring actions undertaken by both TGI Fridays and
Hostmore, and are subject to change following conversation of TGI Fridays'
results from U.S. GAAP to IFRS and using IFRS-consistent accounting policies
adopted by Hostmore, among other factors.

 

(10) Currently Hostmore pays TGI Fridays a franchise fee of 4% of revenue,
which for FY23 equated to £8 million; TGI Fridays' underlying FY23 revenue
and EBITDA is presented inclusive of this fee, and Hostmore's FY23 underlying
EBITDA is presented after incurring this fee; if the Proposed Transaction is
completed, Hostmore's stores would become corporate stores and no longer be
franchised stores that are subject to a franchise fee.

 

(11) TGI Fridays' store count is presented as of 15 April 2024 on an
underlying basis for the continuing business after the closure or
refranchising of 58 company-owned stores. The franchise store count includes
the Hostmore stores which would become TGI Fridays' company stores if the
Proposed Transaction is completed.

 

(12) Purchase value represents an enterprise value of £177 million, based on:

 

a.   224 million Hostmore shares being issued to the TGI Fridays'
shareholders at Hostmore's 18.0p closing share price on 15 April 2024;

b.   $2.5 million of TGI Fridays non-controlling interest; and

c.   $171 million of TGI Fridays net debt (adjusted for the expected
divestment of certain ancillary licensing assets and completion of TGI Fridays
refinancing).

 

(13) The implied enterprise value multiple of 5.4x TGI Fridays' FY23
underlying EBITDA is calculated based on:

 

a.   TGI Fridays' FY23 underlying EBITDA of $41 million (as described
herein); and

b.   An enterprise value of £177 million as calculated above.

 

(14) The comment that "similar London and internationally listed franchisor
businesses currently trade at an enterprise valuation multiple averaging 14x
EBITDA" is made with reference to the mean average December 2023 EV/EBITDA
multiple for McDonald's Corp, Starbucks Corp, Yum! Brands Inc, Restaurant
Brands International Inc, Domino's Pizza Inc, Wendys Co, Domino's Pizza
Enterprises Ltd, Papa John's International Inc, Domino's Pizza Group PLC, Dine
Brands Global Inc., and Denny's Corp sourced from Refinitiv Eikon, as at 12
April 2024.

 

 

 

IMPORTANT NOTICE

 

Numis Securities Limited (trading for these purposes as Deutsche Numis)
("Deutsche Numis"), which is authorised and regulated in the United Kingdom by
the Financial Conduct Authority, is acting exclusively for Hostmore and no one
else in connection with the Proposed Transaction and the matters described in
this announcement and will not be responsible to anyone other than Hostmore
for providing the protections afforded to clients of Deutsche Numis, or for
providing advice in connection with the Proposed Transaction or any other
matter referred to herein. Neither Deutsche Numis nor any of its group
undertakings or affiliates owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect, whether in contract, in
tort, under statute or otherwise) to any person who is not a client of
Deutsche Numis in connection with the Proposed Transaction, this announcement
or any matter referred to herein.

Neither Deutsche Numis nor any of its group undertakings or affiliates accepts
any responsibility or liability whatsoever or makes any representation or
warranty, express or implied, concerning the contents of this announcement,
including its accuracy, completeness or verification, or concerning any other
statement made or purported to be made by it, or on its behalf, in connection
with Hostmore or the Proposed Transaction, and nothing in this announcement
is, or shall be relied upon as, a promise or representation in this respect.
To the fullest extent permitted by law, Deutsche Numis and its group
undertakings and affiliates accordingly disclaim all and any responsibility or
liability (whether direct or indirect, whether in contract, in tort, under
statute or otherwise) which they might otherwise have in respect of this
announcement or any statement contained therein.

Global Leisure Partners LLC ("GLP"), which is authorised and regulated in the
United Kingdom by the Financial Conduct Authority, and registered with the
Securities and Exchange Commission in the US as an authorised Broker Dealer
and is a FINRA member firm, is acting exclusively for TGI Fridays and no one
else in connection with the Proposed Transaction and the matters described in
this announcement and will not be responsible to anyone other than TGI Fridays
for providing the protections afforded to clients of GLP or for providing
advice in relation to the proposed Transaction or any other matter referred to
herein.

This announcement does not constitute an invitation to underwrite, subscribe
for, or otherwise acquire or dispose of any shares or other securities in
Hostmore and it is not intended to form a basis of any investment decision.
This announcement contains certain forward-looking statements, regarding our
intentions, beliefs or current expectations concerning, amongst other things,
our results of operations, financial condition, liquidity, prospects, growth,
strategies and the economic and business circumstances occurring from time to
time in the countries and markets in which the Company operates.

These statements are often, but not always, made through the use of words or
phrases such as "believe," "anticipate," "could," "may," "would," "should,"
"intend," "plan," "potential," "predict," "will," "expect," "estimate,"
"project," "positioned," "strategy," "outlook", "target" and similar
expressions. These forward-looking statements include all matters that are not
historical facts and involve predictions. Forward-looking statements may and
often do differ materially from actual results. Any forward-looking statements
reflect Hostmore, TGI Fridays and TriArtisan's current view, as applicable,
with respect to future events and are subject to risks relating to future
events and other risks, uncertainties and assumptions relating to Hostmore or
TGI Fridays', results of operations, financial position, liquidity, prospects,
growth or strategies and the industry in which it operates. Forward-looking
statements speak only as of the date they are made and cannot be relied upon
as a guide to future performance. Save as required by law or regulation,
Hostmore, TGI Fridays and TriArtisan disclaim any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statements in
this announcement that may occur due to any change in its expectations or to
reflect events or circumstances after the date of this announcement. Nothing
in this announcement should be construed as a profit estimate or profit
forecast and no statement in this announcement should be interpreted to mean
that earnings per share of Hostmore for the current or future financial years
would necessarily match or exceed the historical published earnings per share
of Hostmore.

This announcement has been prepared for the purpose of complying with the
applicable law and regulation of the United Kingdom and information disclosed
may not be the same as that which would have been disclosed if this
announcement had been prepared in accordance with the laws and regulations of
jurisdictions outside the United Kingdom.

This announcement and the information contained herein is not intended for
publication or distribution in, and does not constitute an offer of securities
in, the United States of America (including its territories and possessions,
any state of the United States of America and the District of Columbia
("United States")), Canada, Australia, Japan or the Republic of South Africa,
or in any other jurisdiction where such distribution or offer may constitute a
breach of any law or regulatory requirement. The Company has not registered
and does not intend to register its securities under the US Securities Act of
1933, as amended, or with any securities regulatory authority of any state or
other jurisdiction of the United States, or to conduct a public offering of
any securities in the United States.

Certain figures contained in this announcement, including financial
information, have been subject to rounding adjustments. Accordingly, in
certain instances, the sum or percentage change of the numbers contained in
this announcement may not conform exactly with the total figure given.

Except as explicitly stated, none of the content of Hostmore, TGI Fridays and
TriArtisan's websites, nor any website accessible by hyperlinks on Hostmore,
TGI Fridays and TriArtisan's websites, nor any other website, is incorporated
in, or forms part of, this announcement.

 

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