WILL RFG BECOME OUR NEWEST $1 BILLION COMPANY?
Written on the 6 November 2014 by Nick Nichols
RETAIL Food Group (ASX: RFG) is edging closer to becoming the Gold Coast’s latest billion-dollar company following news two weeks ago that it is acquiring the Gloria Jean’s coffee chain.
Shares in the Southport food franchise group have been steadily rising since then, hitting a high of $6.065 on Tuesday and boosting the company’s market value to $936 million.
RFG’s market capitalisation stood at $750 million prior to the announcement on October 24.
The valuation compares with the Gold Coast’s biggest company by market capitalisation, G8 Education (ASX: GEM), which is worth $1.7 billion.
Institutional investors have been leading the charge to snare RFG shares, with a $40 million capital raising at $4.80 closing heavily oversubscribed last week.
The funds will be applied to the $179.9 million purchase of Gloria Jean’s which is viewed as a company changing acquisition for RFG as it extends its reach further into global markets.
The deal, which also includes the It’s a Grind brand, gives RFG access to 800 franchised outlets across 40 countries and boosts the number of outlets in its multi-brand portfolio to 2400.
In the US, the company will have control of 87 outlets and a coffee roasting facility in Los Angeles, as well as Sydney. Gloria Jean’s has 358 outlets in Australia.
RFG already has 183 international outlets operating under its Michel's Patisserie, Esquires, BB's, Coffee Guy and Cafe2U brands.
The Gloria Jean’s acquisition is expected to add $24 million to RFG’s earnings before interest and tax in FY16, and is poised to boost the company’s bottom line by 36 per cent to $50 million in FY15.
Author: Nick Nichols