I'll offer an alternative point of view.It may sound harsh but...

I'll offer an alternative point of view.

It may sound harsh but SOL lending RFG piles of money to make yet another acquisition feels like lending money to an addict to buy crack. RFG have been addicted to buying other businesses to feed the earnings growth buzz. Sadly it usually ends badly.

Here is a list of some of the RFG acquisitions that I am aware of which I put together last year along with their purchase prices:

The Coffee Guy - $4.36m
Cafe2U - $?
Gloria Jeans - $163m+
Di Bella Coffee - $30-47m
Pizza Capers - $30m
Crust Pizza - $24m

This is in addition to Michel's, Brumbys and Donut King which they originally owned and doesn't include the $10m recently spent on Beefy's. RFG have spent about $300m acquiring businesses in addition to their original key brands to build a combined business which has a total market cap of only $180m.

Case in point: RFG purchased Gloria Jeans for $163m+ nine years ago. At the time GJ had EBIT of $11.8m. They also purchased The Coffee Guy for $4.36m and Cafe2U. Under RFG management for 9+ years the combined EDITDA from all three entities has grown all the way down to $5.7m (last years numbers).

Then there is the Crust Pizza acquisition 11 years ago for $24m plus which was supposed to add $7.5m to the bottom line in the next year alone. A year earlier they purchased Pizza Capers for $30m with a supposed EDIT contribution of $4.3m. 11/12 years later the combined EBITDA contribution of Crust Pizza, Pizza Capers and their latest foray, Rack'em Bones is only $5.8m in total, down from almost $12m. Again from the numbers I crunched on this subject last year.

What happened to all the synergies, cost out exercises with RFG existing systems, market reach and expertise etc? 10+ years and it appears the acquired businesses are about half the size of when RFG acquired them.

I'm not even going to mention the the previous legal issues and I'll deliberately avoid a discussion on their failed takeover offer for Oaks hotels. I kid you not. Look at all the acquisitions so far then ask yourself why borrow money that they don't have to do yet another acquisition before they have shown that they can deliver actual growth or even maintain the existing things that they have acquired.

SOL is lending them the money at a reasonably high interest rate for this latest purchase. SOL is doing nicely I suspect. As for other investors, we will have to wait and see but I would rather be in SOLs position and getting guaranteed income than that of other investors. Overall I don't see SOLs involvement as a bad thing and I do hope that RFG can finally live up to some of its potential because its been very difficult to watch this train wreck over so many years.