(RFG) Donut King ++ BB's Coffee

[tommy]

Trading halt! WTF? Capital raising? Don't tell me its a another takeover, I can't keep up with this!

[etrader]

Tommy given that's till monday and the weekend falls, my gut would tell me that it has become a takeover target, or they are taking something else over.

[tommy]

Tommy given that's till monday and the weekend falls, my gut would tell me that it has become a takeover target, or they are taking something else over.

Hi etrader,

I doubt RFG has become a takeover target (in fact I would NOT be happy if it is snapped up before it realizes its full potential) simply because I don't see any company that is bigger and could be a good franchise fit with RFG... if it is a takeover, they will be the ones snapping up smaller fish. But so soon even before finalization of Michel's deal?

I would have thought its more likely to be about the capital arrangement through a placement that they have implied previously to sort out the financing to take over Michels. But then again, they should just announce it rather than going into trading halt... mmm?

[trader-jim]

I don't think there have been trading halts for the previous takeovers and they would be a bit stretched to start another takeover so more likely to be capital raising.

If its a takeover of RFG who would be likely bidders?

[mark100]

Page 2 of the annoucement says the halt is for a placement

[tommy]

Page 2 of the annoucement says the halt is for a placement

woops. missed page 2, thanx mark for the clarification! Now all that matters is whether it is institutional and what the issue price will be. Better not be below $1.90!

[tommy]

Wow, that's a big placement... market cap will be close to 200 million after that.

But at least its all instos, not surprising they got commitments considering the good price ($1.85).

Now that the financing structure is clarified, I expect a bit of a retreat in share price and then a rerating upwards. Still holding :-)

____________________________

19 October 2007

ANNOUNCES $44.4 MILLION CAPITAL RAISING

Retail Food Group Limited (RFG) announced today that it had received commitments for a
placement of 24 million ordinary shares at $1.85 per share to raise $44.4 million before
costs.

Participants in the placement represent a range of institutional and private investors with all
existing institutional shareholders participating in the placement.


Funds will be applied to partially fund the cash component of the consideration payable to
The Michel’s Group Australia Pty Ltd (TMGA) and also pay down debt associated with the
recent acquisition of Brumby’s.

The placement has been made to new and existing institutional and sophisticated investors
pursuant to Section 708 of the Corporations Act 2001. All of the shares issued under the
placement will rank equally with existing ordinary shares.

The placement has been structured as follows:
• Tranche 1 – comprised of 11 million ordinary shares placed using the Company’s
15% placement capacity under ASX Listing Rule 7.1 raising $20.35 million; and
• Tranche 2 – comprised of 13 million ordinary shares placed subject to shareholder
approval under ASX Listing Rule 7.1 to raise $24.05 million.

A meeting of RFG shareholders to approve Tranche 2 of the placement is proposed for 28
November 2007. The notice of meeting will be sent to RFG shareholders shortly.

Following completion of the issue, RFG will have approximately 97.6 million ordinary shares
on issue.


RFG CEO Tony Alford said “we are extremely pleased with the significant interest and
response received in connection with today’s share placement and the tremendous support
RFG has recently enjoyed in respect of its industry consolidation aspirations and acquisition
activity”.

RFG Chairman John Cowley said, “a number of well respected institutional investors have
now become shareholders following the placement and the Board would like to sincerely
welcome them to the register whilst also thanking those existing shareholders who have
increased their shareholding in the Company”.

Mr Alford added, “not only has today’s placement facilitated the prompt raising of capital
necessary for the further realisation of the strategic plan outlined in our May 2006
Prospectus, it allows RFG to redouble its focus on managing its business, and in particular,
finalising the integration of Brumby’s Bakeries”.
ASX/media release

“With the composition of the Company’s capital structure now substantially determined, and
assuming the TMGA transaction is completed in 1HFY2008, the Company’s Directors remain
confident that the EPS accretion for FY2008 over FY2007 will be equal to or exceed 50%”,
he said.


“The acquisition of Michel’s Patisserie, which will bring total store numbers under RFG’s
stewardship to in excess of 1,030 outlets, bodes well for the Company’s shareholders and
RFG is well placed to deliver further rewards to its shareholders both this financial year and
subsequently”, he said.

Austock Corporate Finance Limited acted as lead manager to the placement referenced
above.

TMGA Update
As previously advised on 7 September 2007, RFG announced that it had entered into a
conditional Scrip & Cash Terms Agreement (“SCTA”) to acquire all the issued shares in
TMGA, the intellectual property owner and manager of the 348 store Michel’s Patisserie
franchise system (“Michel’s”).

The consideration payable to TMGA shareholders is $50 million cash and a scrip component
subject to an incentivated earn-out program based on TMGA FY2008 adjusted EBIT
performance. Assuming full entitlement to the earn-out, the maximum value of the
consideration payable to TMGA is $88 million.

TMGA also has debt of approximately $56 million which will either remain with the company
on completion of the SCTA or be refinanced by RFG.

Together with regulatory and shareholder approval, the SCTA remains conditional upon RFG
obtaining finance on terms which are satisfactory to it.

The balance cash component of the consideration (not covered by funds raised under the
above placement) payable to TMGA shareholders on completion of the SCTA will be funded
by debt and existing cash reserves.

Retail Food Group is a leading Australian retail food brand manager and franchisor. It is the
franchisor and intellectual property owner of the Donut King, Brumby’s and bb’s café
systems. As at 19 October 2007, there were a total of 687 outlets comprising 292 Donut King
outlets established in Australia, 325 Brumby’s outlets established in Australia and New
Zealand, and a further 70 bb’s café outlets established within Australia and New Zealand.

ENDS
Matthew Hart BBS Publications Relations - (07) 3221 6711

[thereslifeafter87]

It looks to me like RFG will still be loaded up with debt even after the capital raising.

The $44 mill won't even cover the purchase price for the new acquisition, and they're assuming another $56 mill in debt on top of the cash they're forking out!

Has anyone done the work to see the likely debt/equity split post acquisition?

[tommy]

RFG share price has been struggling badly lately but hopefully the latest release will boost confidence. Today's trading volume was unusually large despite being on a down day of the overall market.
Following is an extract of today's MD presentation:

RFG has previously provided FY2008 earnings guidance;
• inclusive of the Brumby’s Bakeries Holdings Limited acquisition; being a 55% increase in EBIT to approximately $19 million and NPAT of $9.8 million – an increase of 30%, and
• inclusive of the Brumby’s Bakeries Holdings Limited and The Michel’s Group Australia Pty Ltd acquisitions; being annualized FY2008 EBIT of $32 million – an increase of $20 million or
167% over the Company’s FY2007 EBIT result and a minimum increase in EPS of 50%.

By way of current status we advise that as at the 31st October 2007;
• ATV and AWS in the Brumby’s Bakery, Donut King and bb’s Café systems are trending positively and are either consistent with or exceeding FY2008 forecast for the same period,
• Gross New outlet rollout is also ahead of forecast, and
• At this juncture the Company will exceed forecast 1HFY2008 New outlet and Net outlet growth.

That said, RFG is comfortably achieving its FY2008 earnings guidance so far as it pertains to its business operations without regard to the acquisition of TMGA.
So far as TMGA is concerned, we have also reviewed their management accounts for the period ending 31st October 2007 and can confirm, that based upon current performance TMGA is presently on track to achieve that FY2008 EBIT forecast by RFG, namely $13.2
million.

As previously detailed in this Address, the Christmas, New Year and Easter retail trading periods are critical in determining the outcome of full year operations and we will provide the market with further advice when the Company announces its 1HFY2008 results.

[tommy]

WTF, RFG down to $1.60, this in painful man...

http://bigcharts.marketwatch.com/int...w.x=0&draw.y=0

Low volumes as usual so not worried but lack of depth is a real risk at times of market volatility. All my small caps are getting burnt badly, including ADA.

Anyone still holding?