Retail Food Group Limited : Acquisition of Crust Gourmet Pizza Bars
08/22/2012| 09:42pm US/Eastern
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23 August 2012
ASX/media release
ACQUISITION OF CRUST GOURMET PIZZA BARS
Leading Australian retail food brand manager and franchisor,
Retail Food Group Limited (RFG or the Company) today
announced its entry into a conditional Sale & Purchase
Agreement (SPA) to acquire the business and intellectual
property assets of the Crust Gourmet Pizza Bars ('Crust')
brand system.
First established in Sydney in late 2001 with the ambition of
changing consumer perceptions regarding take away pizza by
creating a business model dedicated to the provision of great
tasting, quality gourmet home delivered products, Crust has
grown to incorporate 119 outlets and a reputation for market
leadership amongst the gourmet take away pizza market.
Whilst based predominantly in NSW and Victoria, the Crust
system has demonstrated enormous potential for organic
network growth both nationally and overseas with outlets now
having been established in New Zealand, Singapore and most
recently, the United States of America(1).
The transaction follows RFG's acquisition of the 118 outlet
Pizza Capers Gourmet Kitchen brand system in April 2012 and
will position the Company as the market leader, both in terms
of scale and menu offer, in the Australian gourmet QSR
segment.
To be sure, whereas Pizza Capers heartland is focused in
Queensland, the Crust system has been concentrated in both
the NSW and Victorian markets.
RFG CEO Tony Alford said, "not only will the transaction
consolidate another impressive retail food system under the
Company's umbrella, it delivers on a number of strategic
initiatives most important of which being (a) the immediate
scale provided by ownership of both the Crust and Pizza
Capers brand systems; (b) the further investment within the
QSR category; and (c) reduced reliance on shopping centres
for outlet growth".
"Whilst it remains RFG's intent to develop each brand as
distinct systems, the acquisition will generate unsurpassed
opportunity for the exploitation of supply side economies,
collaborative marketing, research and development activities,
cross pollination of products and services and a growing
expertise in the gourmet take away pizza market that will
benefit all stakeholders in each system".
"Consistent with the Company's stated acquisitive
methodologies, the transaction will be immediately
Earnings Per Share (EPS) accretive".
"Furthermore, and consistent with all other franchise systems
operated by the Company, the transaction incorporates the
transfer to RFG of all Crust intellectual property assets,
including trademarks and recipes, ensuring the Company is not
beholden to third party licensors nor exposed to the risk of
territory licence non-renewal", he said.
The price for the business will be the equivalent of 7x Crust
FY13 adjusted EBIT and will be paid in two tranches:
• on settlement: $21m cash and RFG ordinary shares to the
value of $3m; and
• approximately 12 months from settlement: an amount
representing the difference between 7x Crust FY13 adjusted
EBIT less the $24m forming part of the purchase price paid in
the initial tranche noted above. The second tranche of the
purchase price will be paid in cash or cash and scrip at
RFG's election.
The cash portion of the consideration payable will be settled
from existing cash reserves and available debt facility.
When combined, the Company's present forecast is that Crust
and Pizza Capers will contribute circa $7.5m to RFG FY13
EBIT(2).
Completion of the transaction is anticipated by the end of
September 2012 however remains subject to usual and ordinary
conditions including completion of RFG's due diligence
enquiries.
Crust CEO Michael Logos will remain with the business post
settlement and, together with co-founder and Managing
Director Costa Anastasiadis, will continue to steer the
business under the oversight of RFG National Office.
"The transaction is the culmination of a six month engagement
during which we have had the opportunity to familiarize
ourselves with RFG management, culture and strategic
objectives. Having regard to those matters, the opportunity
to partner with a growing public company with proven
expertise in the retail food franchising industry offers our
franchisees and other stakeholders early access to the
benefits of a larger organization whilst retaining the core
attributes that have generated the Crust Gourmet Pizza Bar
success story to date", he said.
RFG Chairman Bruce Hancox added that, "the Crust acquisition
offers another excellent opportunity for RFG to apply its
retail food franchising expertise whilst also reinforcing its
commitment to the strategic growth initiatives first outlined
in its May 2006 Prospectus".
"When first admitted to the Official List of the ASX, RFG had
stewardship over a franchised network comprising 330 outlets
across the Donut King and bb's café brand systems".
"In the space of six short years the Company and its
operations have rapidly grown, delivering positive outcomes
for all stakeholders".
"Following completion, RFG's total network population will
exceed 1,350 outlets with Crust representing the seventh cash
generating unit amongst RFG's stable of high quality
businesses which will on settlement comprise existing
wholesale coffee operations together with seven franchise
systems now represented across eight
countries"(3), he said.
About Retail Food Group Limited:
Retail Food Group is a leading Australian retail food brand
manager, franchisor and wholesale coffee roaster. It is the
franchisor and intellectual property owner of the Donut King,
Michel's Patisserie, Brumby's Bakery, bb's café, Pizza Capers
Gourmet Kitchen and Esquires Coffee Houses franchise systems
and roasts over one million kilograms annually of proprietary
coffee products via the Evolution Coffee Roasters Group,
Caffe Coffee and Barista's Choice coffee brands.
ENDS
For further information, interviews or images contact: Tracey
Catterall, Retail Food Group, (07) 5509 2340
(1) Crust outlet population metrics: NSW (48), Victoria
(35), ACT (7), Qld (14), SA (4), WA (5), Tas (1), New Zealand
(2), Singapore (2), USA (1) (2) assuming nine (9) month
contribution of Crust
(3) bb's café & Esquires Coffee Houses, whilst distinct
franchise brands, are consolidated as a single cash
generating unit (CGU) - total CGUs on completion of the Crust
transaction: (1) Donut King brand system, (2) Michel's
Patisserie brand system, (3) Brumby's Bakery brand system,
(4) bb's café & Esquires Coffee Houses brand system, (5)
Pizza Capers Gourmet Pizza Kitchen brand system, (6) Crust
Gourmet Pizza Bars brand system and (7) wholesale coffee
operations.
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