RFG SWEET ON OAKS TAKEOVER

RFG SWEET ON OAKS TAKEOVER

RETAIL Food Group Limited (ASX: RFG) has made a takeover offer for hotel manager Oaks in a cash and scrip deal worth up to $95 million.

RFG is the intellectual property owner and manager of Donut King, Michel’s Patisserie, Brumby’s Bakeries, bb’s cafe and Esquires franchise systems.

The company says the offer is of attractive value to Oaks shareholders and an opportunity to continue to participate in potential upside associated with the Oaks business model.

Oaks is a hotel and resort operator in the serviced apartment hotel sector whose portfolio includes CBD apartments, resorts and villas located throughout Australia, New Zealand, and in Dubai in the United Arab Emirates.

RFG chief executive Tony Alford says assuming the midpoint of Oaks core operations EBITDA of $34 million (guidance announced by Oaks on the 15th April 2011), RFG’s preliminary assessment is that the acquisition would represent an EBITDA multiple of around five times FY 2011 earnings.

“RFG anticipates the Oaks acquisition on a core operations basis and over a full year to be earnings per share (EPS) accretive in the range of 15% to 25% once identified integration synergies are realised,” he says.

“The Oaks business model will align and benefit from the proven expertise of RFG’s systems, management, property and marketing functions.

“Whilst ostensibly Oaks and RFG’s business formats and revenue drivers would appear disparate, on closer inspection the respective business models are closely aligned, attractively synergistic and provide a tangible opportunity to combine the relevant divisional strengths of both enterprises given their remarkable similarity.”

Alford says the Oaks business is poised for reinvigoration and its amalgamation with RFG’s existing franchise system, further diversifies RFG’s revenues and remains consistent with its broad focus on property, leasing, and management of third party stakeholder relationships and interests.

“RFG perceives an opportunity in the immediate term to capitalise on its franchising expertise for the benefit of the Oaks business model via the introduction of franchising relationships,” he says

The offer is subject to ASIC not granting the relief sought by Minor to enable the acquisition of around 34 per cent of the shares in Oaks from the receivers.

Oaks shareholders will be able to elect to receive consideration of either a cash payment of $0.545 for each Oaks share (Cash Alternative); or a cash payment of $2.60 and one RFG share for every 10 Oaks shares (Cash and Scrip Alternative). The cash alternative values Oaks equity at $94.7 million.

The cash alternative represents a 12% premium to the 20 day volume weighted average price of Oaks shares of $0.49; 35% premium to the three month volume weighted average price of Oaks shares of $0.40 56% premium to the $0.35 consideration offered under the takeover offer for Oaks made by Minor; and 5% premium to the $0.52 consideration that Minor has advised it will offer if certain relief is provided by ASIC.

Oaks chairman Doug Wong today welcomed the proposal.
“The Oaks Board has always maintained its key priority has been to maximise value for all shareholders, while maintaining the highest levels of corporate governance,” he says.

“Despite Minor last week indicating that it will increase its offer price from the original $0.35 to $0.52 per share, if certain relief is provided by ASIC, the Board continued to believe this did not adequately reflect the value of Oaks.

“The Oaks Board has been actively canvassing alternative proposals since the unsolicited takeover bid by Minor International and the offer today from RFG certainly vindicates our actions.

“The recommending directors are pleased to recommend RFG’s offer to shareholders, in the absence of a superior offer.”

RFG shares are trading at $2.89.

Enjoyed this article?

Don't miss out on the knowledge and insights to be gained from our daily news and features.

Subscribe today to unlock unlimited access to in-depth business coverage, expert analysis, and exclusive content across all devices.

Support independent journalism and stay informed with stories that matter to you.

Subscribe now and get 50% off your first year!

Four time-saving tips for automating your investment portfolio
Partner Content
In today's fast-paced investment landscape, time is a valuable commodity. Fortunately, w...
Etoro
Advertisement

Related Stories

Owner of Houston’s Farm, Sunfresh and Gourmet Selections enters administration

Owner of Houston’s Farm, Sunfresh and Gourmet Selections enters administration

A national vertically integrated farming and ready-made salad manuf...

Body Fit Training sets sights on Scandinavia with master franchise agreement

Body Fit Training sets sights on Scandinavia with master franchise agreement

After opening up 42 new studios globally in 2024 to date, Melbourne...

AI is not a magic wand – it has built-in problems that are difficult to fix and can be dangerous

AI is not a magic wand – it has built-in problems that are difficult to fix and can be dangerous

By now, all of us have heard and read a lot about artificial intell...

Former AFL boss Gillon McLachlan to lead Tabcorp as new CEO

Former AFL boss Gillon McLachlan to lead Tabcorp as new CEO

After speculation was quashed that he would be joining Racing Victo...