Owner of retailers including Donut King and Michel’s Patisserie, Retail Food Group (RFG) has made an off-market takeover offer to buy Oaks Hotels & Resorts
Oaks is expected to consider a cash payment of 54.5 cents per Oaks share, valued at $94.7 million, or a cash payment of $2.60 and one Retail Food Group share for every 10 Oaks shares.
RFG CEO Tony Alford said the Oaks business model will align and benefit RFG’s systems, management, property and marketing functions.
“Whilst ostensibly Oaks and RFG’s business formats and revenue drivers would appear disparate, on closer inspection the respective business models are closely aligned, attractively synergistic and provide a tangible opportunity to combine the relevant divisional strengths of both enterprises given their remarkable similarity,” he said.
“Notwithstanding that Oaks possesses a unique and compelling business model its development pathway has been restricted by access to attractive and or appropriate funding. RFG will leverage its strong banking relationships combined with strong equity support to obviate this shortcoming and underpin both organic and acquisitional growth.”
Based on RFG’s preliminary assessment of the acquisition, it said it will multiple Oaks’s EBITDA of $34 million, which was announced in April 2011, by five times.
Alford said, as was the outcome with its previous acquisitions of Brumby’s and Michel’s, the Oaks acquisition is capable of short-term integration and robust growth.
“The Oaks business is poised for reinvigoration and its amalgamation with RFG’s existing franchise system, further diversifies RFG’s revenues and remains consistent with its broad focus on property, leasing, and management of third party stakeholder relationships and interests,” he said.
“Indeed RFG perceives an opportunity in the immediate term to capitalise on its franchising expertise for the benefit of the Oaks business model via the introduction of franchising relationships.”