D-Day looming for Freedom Foods

Carrie LaFrenzSenior reporter

Nov 27, 2020 – 3.29pm

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The five-month long wait for suffering investors in Freedom Foods Group is nearly over, with the manufacturer due to report its overdue 2020 full-year accounts as well as the restated past few years figures on Monday – which are likely to show massive write-downs.

Those looking for a full briefing, including a deal with distressed debt player Oaktree Capital Management, will be disappointed with the stock unlikely to trade for another few weeks as the pair continue to nut out final terms of the recapitalisation plan.

Michael Perich is now Freedom Foods CEO, but previously acted as a non-executive alternate director for Ron Perich, and was also director of dairy farm operations at the Perichs' Leppington Pastoral Company.

Freedom Foods is seeking a $200 million-odd cash injection, after it suddenly revealed in late June it would have to write off $60 million worth of old cereal and UHT milk as well as accounting irregularities, which sent the company into trading suspension. The stock last traded at $3.01 each.

The Australian Financial Review revealed earlier in November that the major backers of Freedom Foods, the Perich family, are now in advanced talks with the US-based alternative investment management firm.

Sources said the troubled company behind names such as Messy Monkeys and MilkLab almond milk is "heading in the right direction" but that days are numbered for chairman Perry Gunner, who will face shareholders on Monday.

RELATED QUOTES

FNPFreedom Foods Group

$3.0100.00

1 year1 day

Nov 19Mar 20Jun 202.8004.2005.600

Updated: Nov 28, 2020 – 6.48am. Data is 20 mins delayed.

View FNP related articles

NABNational Australia Bank

$23.320 -0.68%

Nov 19Jun 20Nov 2012.00020.00028.000

SGHSlater & Gordon

$0.960 0.52%

Nov 19Jun 20Nov 200.3000.9001.500

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One investor told AFR Weekend he would not put more money into the business with the current chairman remaining. The shareholder noted that Oaktree will bring much needed expertise, but it all comes down to the discount on the convertible notes being issued.

He added he believed Michael Perich, who was installed as CEO when long serving boss Rory Macleod was exited, is doing a good job. Mr Perich has previously acted as a non-executive alternate director for Ron Perich.

The Perich family own their majority 52.5 per cent stake in Freedom Foods via an entity called Arrovest. Freedom Foods in early September was granted a reprieve by its lenders HSBC and National Australia Bank with the standstill agreement effective until the end of November.

As part of the recapitalisation, it is believed current shareholders will be able to participate in the purchase of the convertible notes, which will be less dilutive for them over an equity issue. Another concern was legal risks around any possible class action.

Slater & Gordon Lawyers indicated it has been fielding increased calls from aggrieved investors.

Freedom Foods, which declined to comment, is also facing legal action in the US, where its supplier of Almond Breeze milk products is suing the Australian snacks and dairy group for $US16 million ($22.3 million) for alleged fraud and breach of contract.

The terms reached with Oaktree could involve a number of board seats for the fund, and stipulate that no dividends will be paid for the term of the convertible bonds until conversion, which could be up to five years. It is understood Freedom Foods will remain a publicly-listed company.

"It will be good to have them (Oaktree) on board to grow much bigger over time. The interest in the dairy space and plant based brands is potentially a massive opportunity."

Newly-appointed chief financial officer Josée Lemoine recently pushed out her start date by one month, indicating she wants to see the company recapitalised before coming on board.