RETAIL Food Group (ASX: RFG) has ripped up an agreement to buy Italian restaurant chain La Porchetta after the vendors failed to meet the terms of the agreement.
In a brief statement to the Australian Securities Exchange, RFG says the share purchase agreement (SPA) for La Porchetta has been terminated.
While it appears talks are continuing with the vendors, RFG has given no indication of whether the deal could be resurrected.
RFG announced on August 28 that it was acquiring La Porchetta, along with the Cafe2U mobile coffee business, for a combined outlay of $31 million.
The news came on the same day the company revealed a 15.2 per cent surge in 2014 full-year earnings to $36.9 million.
RFG did not disclose how much it was paying for La Porchetta alone, but the deal would have seen the Southport-based franchise group acquire 70 restaurants across Australia.
“The SPA was subject to a number of conditions, including satisfactory completion of the company’s due diligence investigations,” says RFG in a statement.
“RFG advises that the foregoing condition has not been satisfied and, as a consequence, the SPA has been terminated.
“RFG is presently engaging with the La Porchetta vendors in connection with those matters which have influenced the above outcome, and will keep the market advised of any future developments in this respect.”
RFG chief executive Tony Alford was not available to comment further on the abandoned deal.
The company has enough on its plate at the moment anyway with news on October 24 that it was buying US-based Gloria Jean’s Coffees for up to $179.9 million.
The deal, which also includes the It’s a Grind brand, gives RFG access to 800 franchised outlets across 40 countries and boosts the number of outlets in its multi-brand portfolio to 2400.
In the US, RFG will have control of 87 outlets and a coffee roasting facility in Los Angeles, as well as Sydney. Gloria Jeans has 358 outlets in Australia.
The Gloria Jean’s acquisition is expected to add $24 million to RFG’s earnings before interest and tax in FY16, and is poised to boost the company’s bottom line by 36 per cent to $50 million in FY15.
RFG owns Brumby’s Bakeries, Michel’s Patisseries and Donut King, as well as pizza chains Crust and Pizza Capers which helped drive the latest full-year result higher.
The Gloria Jean’s deal has added about $200 million in market value to RFG since it was announced, with the company currently capitalised at just over $900 million.
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