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Hostmore PLC (LSE:MORE) saw its share price collapse by over 90% following the announcement that it would no longer proceed with its planned acquisition of TGI Fridays, Inc. The deal was scrapped after TGI lost control of a key revenue source, significantly affecting its future earnings potential, which had been a crucial part of the transaction.
The collapse of the deal was triggered when the American group, TGI Fridays, was removed as the manager of TGIF Funding LLC. This entity controls the royalties from franchise agreements and intellectual property, both highly profitable streams for the business. The loss of control over these vital royalties led Hostmore to abandon the acquisition. Despite the halt in negotiations, both sides indicated that the possibility of future discussions remains open.
In addition to the abandoned acquisition, Hostmore provided updates regarding its ongoing sale process of its corporate stores. The company confirmed that discussions with potential buyers are at an advanced stage. However, the sale price is expected to be insufficient to cover its outstanding debts, leading to a grim outlook for shareholders. It is unlikely that they will recover any substantial value from the process.
Hostmore’s board has signaled that, following the completion of the sale, the company will likely be wound up and delisted from the London Stock Exchange. The finalization of this process is anticipated by the end of September.
At the start of trading, the company's stock fell sharply, dropping by 8.6p to 0.89p, reflecting the negative impact of the failed acquisition and the bleak prospects for the business moving forward.
The series of events marks a significant setback for Hostmore, as it navigates a challenging period in its operations. The loss of the TGI Fridays acquisition, combined with the likelihood of being unable to cover its debts through the sale of corporate stores, has placed the company in a difficult position. Shareholders, meanwhile, face little chance of recovering value as the business nears the end of its public trading journey.
