Freedom Foods investors antsy over lack of information

Carrie LaFrenzSenior reporter

Updated Nov 17, 2020 – 6.00pm, first published at 5.10pm

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Investors in Freedom Foods Group are getting nervous with virtually no contact from the troubled company, which is yet to finalise its accounts and special situation funds are circling.

The company behind names such as kids snack Messy Monkeys and Heritage Mill cereals on Tuesday pushed out the start date of its newly appointed chief financial officer, Josée Lemoine, by one month to December 16.

Tony Perich's nephew, Michael Perich, was installed as CEO of Freedom Foods after former head Rory Macleod left the business in late June. AFR

It is understood that Freedom Foods is still wrangling over the finalisation of its accounts for the past three years following a major investigation led by Ashurst and PwC. Its auditor, Deloitte, is still deliberating over the signing-off.

One institutional investor said it has not had any contact with Freedom Foods since meetings with the CEO and chairman were pushed out after it extended its trading suspension until November 30.

"We have been left in the dark," the shareholder said. "Sounds like an evolving situation with distressed debt players coming into play. We can't do anything until we see the accounts.

RELATED QUOTES

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Updated: Nov 17, 2020 – 8.30pm. Data is 20 mins delayed.

"We are at that point where we are less than two weeks out from the deadline. It feels like there is still so much uncertainty."

As first flagged in The Australian Financial Review, Freedom Foods is seeking to recapitalise with a $200 million-odd cash injection.

While Freedom Foods and its advisers, Moelis Australia and Arnold Bloch Leibler, were engaged with four investment banks about a possible equity raising, attention has firmly turned to nutting out a possible deal with one of three credit and hedge fund players showing interest.

Global giant Oaktree Capital Management, New York-based Anchorage Capital Group and San Francisco-based Sixth Street Partners (the former credit arm of TPG) have separately lobbed recapitalisation proposals.

It is understood the funds each propose to recapitalise the company via convertible notes. Part of any recapitalisation plan may include the sale of a division, debt provided by a special situations fund and an equity raise via an entitlement offer – although the latter appears to be hindered by a possible class action overhang.

The group's controlling shareholder, the Perich family, confirmed it would tip in the first $100 million, and the balance of $100 million would come from others.

A source close to the company said Freedom Foods is well aware of the need to look after its existing shareholders.

While special situation funds bring needed expertise, investors are wary. They raised issues around the lack of faith they have in the board, and Freedom Foods to execute, given the absence of oversight when in late June it suddenly revealed a $60 million stock blowout dating back as far as 2017,and accounting irregularities.

"What's going to stop this from happening again? Do they have the skills to deal with this from corporate governance perspective?" said one investor.

"We have lost all this money – we can't trade our shares. It's been a long time. I just feel like we are not getting enough information."

Another institutional shareholder added that non-executive director Trevor Allen and chairman Perry Gunner's time is limited, and both needed to exit the business.

He added that he felt reassured by the wealthy Perich family who will "stand up for their rights", so they will also stand up for individual shareholders rights too.

Freedom Foods is facing a litany of issues, including being sued by its former group general counsel over allegations she was unlawfully dismissed after making several complaints about the company's operations.

Key supplier of Almond Breeze milk products is also suing the Australian snacks and dairy group for $US16 million ($22.3 million) in a California court for alleged fraud and breach of contract.