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TGI Fridays’ $380M deal is called off

Allegro Merger Corp., citing “extraordinary” conditions, opted not to merge with the bar and grill chain.
TGI Friday's
Photograph: Shutterstock

TGI Fridays will not be going public after an investment company backed out of a planned $380 million merger last week, according to federal regulatory filings.

Allegro Merger, a shell company that agreed to take the casual-dining chain public in a reverse merger late last year, opted to back out of the deal and return money to shareholders. Allegro cited “extraordinary market conditions and the failure to meet necessary closing conditions.”

The merger would have taken Fridays public. Its collapse will likely generate significant questions about the chain, which struggled with steeply falling same-store sales going into the merger and had $371 million in debt, according to regulatory filings.

In late March, Allegro secured an extension of the timeline for absorbing Fridays. The original deadline of March 31 was extended to April 30, but Allegro opted not to wield the extension, according to a securities filing. 

In the last three months of 2019, Fridays same-store sales declined 11.3%, while traffic declined 9.1%. Over the previous five years, meanwhile, the chain’s domestic system sales declined 28%.

The company has been acquiring franchisees, banking on its ability to improve operations and therefore the chain’s sales. It inked a $19 million deal in early January to acquire 36-unit Briad Restaurant Group, its second-largest franchisee.

Allegro agreed to merge with Fridays in early November. Allegro is a blank check company that takes money from public equity investors and uses it to buy an existing, privately held company, therefore taking that company public.

By backing out of the deal, Allegro will dissolve and will return funds to shareholders.

Fridays is owned by investment firms TriArtisan Capital and MFP Partners. The chain operates 396 U.S. locations and 446 international restaurants, and its strategy involves resuscitating U.S. operators while growing international restaurants.

Friday’s generated $431 million in revenue in the year ended Dec. 30 but recorded a net loss of $20 million, according to filings. It finished the year with $5.1 million in cash.  

This is the second reverse merger called off in less than a year. A previous deal that would have taken public Chuck E. Cheese’s parent company CEC Entertainment collapsed last July.

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