TGI Fridays' SPAC Merger Is Terminated
Blaming “extraordinary market conditions,” the TGI Fridays deal with Allegro is off.
According to an SEC filing, leaders at Allegro Merger Corp. and TGIF Holdings “mutually determined” that because of COVID-19-related issues and “failure to meet necessary closing conditions” the deal could not proceed. The SPAC merger, where a public holding company merges with an acquisition target, was announced in November 2019 and would have cleaned up Fridays' $350 million in debt and cashed out private equity owner Sentinel Capital Partners to the tune of $30 million in cash along with some shares of the future company.
The specifics of the closing conditions were not announced, but with COVID-19 ravaging the restaurant segment, any typical performance obligations would be nearly impossible to meet. Casual dining restaurants like TGI Fridays have seen traffic plummet as much as 90 percent as shelter-in-place orders and social-distancing measures keep people away from sit-down eateries. The majority of states shutting down dining rooms then made it all but impossible to do anything but the historic fraction of sales represented in take-out and to-go business.
The company released a statement faulting COVID-19 as the cause of the terminated merger.
“TGI Fridays can confirm that the sale of the brand has been paused due to the recent global crisis of the COVID-19 coronavirus," read the statement. "Our focus is on the health and wellbeing of our team members, guests, franchisees and our communities as we work to provide delivery, take-out and curbside operations in the majority of our restaurants. We will continue provide a relatively contactless experience to our guests and seek out opportunities to donate food to those who are serving the front lines of this global crisis."
On March 26, the company held a special meeting for stock holders in Allegro to raise the question of extending the incorporation date for the merged company to April 30. That measure passed with overwhelming support, 10 million voting for the extension and 1.7 million opposing it.
That would have been the second extension beyond the original January 6 combination date. The prior extension also came with a $781 million loan that would have been repaid in the final merger.
In a filing dated April 1, however, Allegro Merger Corp. opted not to amend the charter, rendering the merger terminated. Instead, Allegro will liquidate and return the $115 million invested back to investors.
Fridays has been working through a turnaround for years. The company was acquired by Sentinel Capital Partners in 2014, and Aslam Khan and his longtime CFO Giovanna Koning took over as leaders in 2017. The duo had executed a successful turnaround of multi-concept operator Falcon Holdings. Fridays saw a lot of investments in technology, training and culture, as well as menu tweaks and innovation. Since then, Ray Blanchette took over as CEO.
But it has been an uphill battle for the iconic, 55-year-old brand. In the 2019 Franchise Times Top 200+, the company slipped to No. 60 as sales sunk 7.8 percent. The year prior it was No. 52, when sales sank by 3.7 percent.