Cafes and coffee, not to mention bread, pizzas and muffins, and the odd donuts are obviously hot so far as investors are concerned.
The biggest purveyor of all things carbohydrate in Australia, Retail Food Group (RFG), saw its shares jump by more than 9% at one stage yesterday when trading resumed after announcing it had successfully completed a $40 million equity raising to fund its $160 million plus purchase of Gloria Jean’s Coffee.
The stock closed at $5.29, up 8.8%, far better than the 0.9% rise in the ASX 200.
The 8.3 million share placement, at $4.80 per share, “was strongly supported by the company’s existing institutional investors and new shareholders, and was significantly oversubscribed,” the company said in a statement to the ASX.
As a next step in the financing deal, the company says it will “shortly” provide details on a $15 million share purchase plan for retail investors.
“Market appetite for RFG shares in the placement was strong, and the company is pleased to welcome a number of respected institutional investors to the register,” CEO Tony Alford said in yesterday’s statement.
Retail Food Group shares went into a halt on Friday to allow the placement to take place.
Retail Food Group will fund the deal with $98.5 million debt and the $65 million equity raising, which includes the mooted share purchase plan.
RFG YTD – Retail Food purchases Gloria Jean’s
Gloria Jean’s has 800 coffee outlets globally, including 360 in Australia.
The coffee chain was expected to make $11.8 million in earnings before interest and tax in the 2015 financial year and $6.3 million profit.
As a result of the purchase Retail Food Group now forecasts a 36% jump in net profit in the 2015 financial year, up from the previous guidance of 15% to 30% growth.
Before the purchase, RFG had 519 coffee outlets in Australia and 183 internationally under the brands Michel’s Patisserie, Esquires, BB’s, Coffee Guy and Cafe2U.
Buying Gloria Jean’s upped its store count by 358 domestically and 420 around the world.
RFG is buying the intellectual property rights to the Gloria Jean’s and It’s a Grind brands, and will be the operational manager of the business in Australia and the US.
It will also take ownership of its wholesale coffee roasting operations in Australia and the US, and will be the franchisor of the business in 40 countries.
RFG is also the franchisor and owner of Brumby’s Bakeries, bb’s Cafe, Pizza Capers, Crust and Big Dads Pies brands.
It is one of the few companies that have ridden the boom in cafes, coffee and food in the past five years. In fact spending in this area now well exceeds that in department stores.
