ASX-listed Retail Food Group has announced a conditional deal to acquire franchised bakery chain Michel’s Patisserie for $50 million cash and scrip from John Livy and ANZ Private Equity.
The deal which follows the company’s purchase of the Brumby’s Bakeries chain in May confirms that Retail Brands Group, the owner of the bb’s café and Donut King chains, is shaping up as the biggest franchise industry consolidator in Australia.
Michel’s Patisserie franchise system, which sells cake, coffee and patisserie-related products, has 340 franchised outlets in Australia, and a further six franchised outlets in New Zealand.
The $50 million cash and a scrip payment is subject to an earn-out program based on Michel’s 2007-08 adjusted EBIT performance. If conditions are met, the maximum value of the deal is $88 million.
It is just over a year since John Livy and ANZ Private Equity bought bakery and cafe chain Michel’s from founders Noel Roberts and Noel Carroll. Executive director Livy and his investors told newspapers in May they have closed stores, centralised ordering and administrative processes to set the company up for more profitable growth.
Livy, the managing director of Michel’s, will remain in his role. Bruce Hancox, an adviser at Michel’s will join the RFG board.
Retail Food Group has issued a new profit guidance following the announcement of the deal. The company expects that the successful completion of the Michel’s transaction would result in a revised 2007-08 guidance of $32 million in EBIT, an increase of approximately $20 million or 167% on 2006-07.
The deal is subject to RFG getting finance, shareholder approval, ASX approval of performance shares to be issued in connection with the scrip component of the consideration and RFG’s due diligence.
RFG chief executive Tony Alford said: “The (Michel’s) acquisition was part of the company’s strategy to consolidate a number of retail food franchise systems to achieve economies of scale through multi-brand ownership and leveraging of existing franchise systems.
“Michel’s, as with Retail Food Group’s existing systems, would retain its unique and distinct branding and identity,” Alford said.