RFG 1.41% 7.2¢ retail food group limited

Crust Pizza sale for $100m, page-2

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    cashed up regional equity investor PAG Asia Capital is believed to be in talks to buy Australia's third largest pizza chain, Crust Gourmet Pizzas.
    Street Talk understands PAG is one of the final parties standing in an auction for Crust, which has been put on the block by ASX-listed parent Retail Food Group.
    Sources said PAG was in pole position to take the asset, after edging in front of Pizza Hut Australia's owner Allegro Funds in the process run by KPMG.

    Street Talk. STUART QUINN
    PAG is one of the Asian region's best known private equity investors. The firm recently closed a new $US6 billion Asia-focused buyout fund, and already owns an Australian food business in baked goods chain The Cheesecake Shop.
    Lending sources said it had been actively seeking to boost its Australian portfolio in recent years.
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    Crust is expected to be worth about $100 million. It is the biggest part of Retail Food Group's domestic quick service restaurant division, which also includes the Pizza Capers brand.
    Analysts reckon it would make sense for Retail Food Group to seek to sell the whole unit, as it explores ways to pay down debt.
    Retail Food Group's division recorded $169.7 million in network sales and $10.2 million EBITDA in the 2018 financial year. IBISWorld estimates it has about 4 per cent of the pizza restaurants and takeaway market in Australia, which would make it the third largest player. The biggest owners include Domino's Pizza Enterprises (29.8 per cent) and Allegro's Pizza Hut (7.2 per cent).
    The auction comes as Retail Food Group is under pressure from its banks to sell assets and reduce its debt pile.
    The company owed banks $258.9 million at June 30, which was more than 3½-times its underlying earnings. The debt balance was big enough to have Retail Food Group in front of its banks renegotiating covenants.
    Retail Food Group's lenders have since waived covenant testing as at December 31. The covenants are due to be tested next as at March 31.
    It remains to be seen what other brands could be thrown in with the Crust sale, should it eventuate. Retail Food Group's biggest earner is its domestic bakery/cafe business, which includes Michel's Patisserie, Brumby's Bakery, Donut King and Gloria Jeans.
    The Crust auction comes about 6½ years after the Retail Food Group bought the business for $41 million and appointed Crust's then managing director Michael Logos as the company's QSR divisional director.
 
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