TGI Fridays UK on the block as private equity owner plans sell off

* Board calls reinvestment "inappropriate" as market worsens

* Recommends sell-off, return of cash to investors

* Says assets are stable, good opportunity for new buyer (Adds further details, background, shares)

By Sinead Cruise

LONDON, Oct (Shenzhen: 000069.SZ - news) 4 (Reuters) - 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 (Tel Aviv: ELTR.TA - news) , 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.

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.

Britain has seen a raft of retail failures including Toys R Us UK, electricals group Maplin, drinks wholesaler Conviviality (LSE: 131376.L - news) and discount retailer Poundworld. Restaurant groups have also struggled with Prezzo, Byron and Jamie's Italian all closing stores.

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 were 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 pounds($193.25 million) at March 31, while Hotter Shoes was valued at 50 million pounds.

Electra's shares were trading 4 percent higher at 0753 GMT. The meeting with shareholders on the proposal is due to be held on October 30.

Electra sold its minority interests in PhotoBox and Knight Square (NYSE: SQ - news) at prices 103 percent above March 31 adjusted net asset value and said it was confident that its remaining corporate investments represented "an opportunity for value creation within an acceptable timeframe."

Electra also said it would pay an initial special dividend of 140 million pounds, equal to 365 pence per share, in December following completion of the PhotoBox sale, and a subsequent special dividend relating to the 21 million pound proceeds of the sale of property management firm Knight Square. ($1 = 0.7710 pounds) (Additional reporting by James Davey, editing by Huw Jones and Jane Merriman)