Electra Private Equity is to consult shareholders on a sale of UK restaurant chain TGI Fridays as part of a broader plan to liquidate its portfolio and return cash to investors against a tough trading backdrop for British retail brands.
Electra, which also owns footwear chain Hotter Shoes, said the proposals to wind up its portfolio followed a lengthy review that had already led to the sale of its non-controlling interests in PhotoBox and Knight Square.
It follows a period of increasing pressure from activist shareholder Sherborne Investors and a failure to find a buyer interested in acquiring its entire portfolio earlier this year.
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Electra's move highlights the impact of a squeeze on British consumers' budgets, a shift away from high street spending towards holidays and entertainment, and intense online competition. Uncertainty over Brexit has also weighed on consumer sentiment.
Increased Competition And Fresh Investment
Electra said both TGI Fridays and Hotter Shoes have been hit by increased competition in recent months, with TGI Fridays particularly impacted by heavy discounting prevalent in the casual dining sector.
Both companies are now in need of fresh investment to stabilise their positions and provide a platform for future growth, but Electra's board said it was "inappropriate" to reinvest in view of the significant discount in Electra's shares versus the net value of its assets.
"The board has therefore concluded, and recommends, that it is in the best interests of shareholders to conduct a managed wind-down of the portfolio over a period of time, allowing optimisation of returns, the return of cash to shareholders, and ultimately the winding up of the company," Electra said.
TGI Fridays was on Electra's books at £149 million at March 31, while Hotter Shoes was valued at £50 million.