Retail Food Group reviews options after ASIC clears Minor bid for Oaks

Retail Food Group, the listed retail franchise manager behind Brumby’s and Donut King, says it is reviewing its options for acquiring Oaks Hotel & Resorts after the corporate regulator permitted a rival suitor to effectively nab a majority stake in Oaks.

RFG, which has more than 1,100 franchise outlets, including Michel’s Patisserie and bb’s café, was tight-lipped this morning, saying only it was looking at its options.

One option believed possible for the company is an appeal of the Australian Securities and Investments Commission decision to the Takeovers Panel.

RFG announced a surprise bid for the debt-laden apartment-hotel company Oaks Hotels earlier this week. The bid was endorsed by key Oaks directors.

But the $94.7 million offer followed an announcement by Bangkok-based Minor that it had nabbed a 54% stake in the target, by buying a 34% stake auctioned by PricewaterhouseCoopers which once belonged to former Oaks founder and chief Brett Pointon.

RFG and Oaks maintained that Minor could only claim to have just under 20% of Oaks until ASIC cleared its purchase, and said it would formally ask the regulator to reject Minor’s application for relief.

But ASIC did not agree, providing relief to enable Minor to buy the stake.

When announcing the takeover plan, RFG said its business model and that of Oaks were “closely aligned, attractively synergistic and provide a tangible opportunity to combine the relevant divisional strengths of both enterprises given their remarkable similarity.”

But shareholders did not share the enthusiasm for the unusual tie-up, with RFG’s share price slumping from $2.90 to $2.46 today amid confusion about whether the businesses are complementary.

RFG’s offer is a 5% premium to Minor’s offer. It had two options on the table: a cash payment of $2.60 plus one RFG share for every 10 Oaks shares, or 54.5 cents per share.

Last month, Oaks noted a KPMG assessment of the company valuing it at between 68 and 79 cents.

But with Minor sitting on a majority stake, there are question marks about the likelihood of an RFG bid getting up.

Oaks and RFG share two directors, John Cowley and Colin Archer, although Oaks stresses the pair were excluded from the takeover discussions. Doug Wong and fellow directors Stephen Lonie and Mark Gray said they intended to sell their stake into the RFG bid.

Minor threatened legal action against the Oaks board earlier this year as a spat emerged over whether it had picked up a majority stake. It has threatened a board spill, with former BRW Rich Lister Pointon promised a significant role under the company’s control.