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RFG should have told investors about its looming suitor

The story, published mid-afternoon online on The Age and the Herald, reported that competing funds were recently told their proposals were no longer being considered as it was now dealing exclusively with a local fund.

Within hours further details emerged in the media and finally, long after the market closed, RFG confessed it was talking to Soliton Capital Partners about a solution to its financial woes.

Equity investors are expected to face a heavily dilutive capital raising.

Soliton is backed by Hong Kong-based SSG Capital Management.

The company statement said Soliton was looking to provide about $160 million to reboot the company’s finances.

Not a minute too soon. RFG’s debt pile sits at $260 million and its twitchy banks are looking at a third quarter maturity.


This all sounds like something the ASX and investors might have thought worth knowing about in light of the recent share price movement.

It seems likely under the deal the banks would get 100 cents in the dollar. Equity investors, on the other hand, will face a heavily dilutive capital raising, with Soliton emerging as the dominant shareholder and existing investors virtually diluted out of existence. Why the banks are taking no haircut when small shareholders are likely to get virtually wiped out is just one of many questions RFG will need to answer.

The only asset for sale is Dairy Country, which is likely to fetch $20 million. The other businesses such as Pizza Capers and Crust, have struggled to find a buyer.

The company pushes the line in its belated statement that the Soliton bid is “indicative”, “non-binding”  and “conditional”. But in the same breath admits Solitan has been granted due diligence and “limited exclusivity”.

Limited exclusivity? This bizarre phrase is the icing on the cake for the whole schemozzle. Exclusivity is by its nature absolute, you cannot be a little bit exclusive any more than you can be a little bit honest.

Investors deserve better than this particularly those who have been through the ringer with a company like RFG.

Since December 2017 when a media investigation by The Sydney Morning Herald and The Age exposed a savage business model that was pushing hundreds of franchisees to the wall, RFG’s share price has fallen from $4.40 to close on Thursday at 14 cents. Since Friday the shares have rocketed to 22 cents.

Over that period it has had a revolving door of senior executives, a board overhaul and a series of earnings downgrades at the same time as it has had to renegotiate its debt with the banks.

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