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Hostmore, a British restaurant group, announced Monday that it has called off its £177 million ($231.4 million) deal to acquire the American-themed casual dining chain TGI Fridays after losing control of key assets and revenue streams.

Hostmore £177M TGI Fridays Takeover : Control Over Revenue Streams in Jeopardy

In a statement, Hostmore revealed that the trustee of TGI Fridays' corporate securitization had dismissed TGI Fridays as the manager of TGI Funding LLC, which controls the franchise agreement royalties, intellectual property revenues, and other fees. Although TGI Fridays retains residual interest in TGI Funding, Hostmore stated that this termination compromises control over the royalty stream, which was a crucial factor in the potential acquisition.

"The predictable and highly cash generative royalty stream of TGI Fridays was the primary attractive feature for the group in pursuing the acquisition," Hostmore explained. The company indicated that the loss of control over these revenue streams could impair future business performance.

Hostmore £177M TGI Fridays Takeover : Potential for Future Talks

Despite the cancellation, both Hostmore and TGI Fridays have expressed openness to resuming discussions if circumstances change. The original acquisition, announced in April, was part of Hostmore's plan to purchase TGI Fridays from TriArtisan Capital Advisors LLC and MFP Partners LLP. Hostmore had retained Herbert Smith Freehills LLP for legal counsel, while TGI Fridays was advised by Ropes & Gray LLP.

Hostmore’s Shift to a Franchise Model

Hostmore, which is listed on the London Stock Exchange, already operates TGI Fridays franchises in the U.K. through its subsidiary Thursdays. The company had been transitioning to an asset-light, fully franchised model, aiming to sell TGI Fridays' 92 corporate-owned U.K. stores and Hostmore's 87 restaurants.

On Monday, Hostmore reported that the sale process for these locations had reached an "advanced stage" with several formal bids. However, following the termination of the takeover, Hostmore now believes it is "unlikely" to recover significant value through the sale, which is expected to conclude later this month.