“Disappointed” Retail Food Group walks away from Oaks, flags further acquisition opportunities

Retail Food Group, the listed food brand manager and franchisor behind Brumby’s and Donut King, says it is disappointed to walk away from its agreed takeover offer for Oaks Hotels and Resorts, but will continue to look at retail food franchising opportunities.

RFG executive director Nigel Nixon told SmartCompany this morning the company had spent months and tens of thousands of dollars on its failed bid, which was revealed to the market after Thai-based Minor said it had nabbed a majority stake in Oaks.

Nixon says RFG decided to give up on its $95 million bid for the debt-laden hotel-apartment company because there was no certainty the Takeovers Panel appeal would block Minor’s acquisition of a 34% stake in Oaks.

The Australian Securities and Investments Commission last week permitted Minor to pick up the large holding, which once belonged to private companies connected to Oaks founder Brett Pointon. The stake was being sold by receiver-manager PricewaterhouseCoopers after two of Pointon’s private companies collapsed.

“There’s a view from our legal team, and also the Oaks board’s legal team, that the Takeovers Panels would reverse the decision,” Nixon says.

“But unless that was assured, we’re not prepared to let that linger.”

Nixon said negative shareholder response played a role.

“In light of apparent market sentiment which resulted in a share price fall, our feeling is that – and there’s been divided feeling over it on the shareholder feedback we’ve received – it’s better left alone,” Nixon says.

RFG – which has more than 1,100 franchise outlets, including Michel’s Patisserie and bb’s café – has seen its share price fall to $2.45, having reached nearly $3 last month as market watchers struggled to grasp the rationale behind the bid.

Nixon remains disappointed with the PwC sales process, saying RFG was of the understanding that the accounting giant would consult with it after completing the process.

RFG did not want to make public its interest Oaks until it had a completed agreement.

But looking ahead, Nixon says RFG is continuing to examine retail food franchising opportunities, with “reasonably established” systems with more 80 outlets or more sought.

“There are various opportunities out there, but not any that could be announced,” he says.

Minor chief operating officer Dillip Rajakarier could not be contacted this morning, but he has previously told SmartCompany that he will initiate a board spill at Oaks, and give Oaks founder and former BRW rich lister Pointon a “very senior role” at the company.