RFG says rescue offer not enough to move share price

Troubled cafe and bakery franchisor Retail Food Group has defended the timing of when it told investors about a proposed bail-out deal, which it confirmed after its shares jumped 70 per cent in three days.

The Australian Stock Exchange and the Australian Securities and Investment Commission are both looking into trading and RFG's disclosure during the price surge.

RFG said the bail-out offer was not material information. Credit: Jessica Shapiro

RFG - which owns the Gloria Jeans, Michel's Patisserie, Brumby's and Donut King brands - responded to an ASX "please explain" on Monday by saying there was no new information that could be causing the extraordinary price rally.

On Tuesday, The Age and SMH revealed RFG was dealing with just one fund, Soliton Capital, on a debt and equity deal to help RFG pay down its $260 million debt, which falls due later this year.

RFG later that day confirmed Soliton's $160 million rescue offer and that it had given the fund "limited exclusivity" and access to due diligence.

The ASX wrote to RFG again on Wednesday asking why the company did not tell the market about the deal sooner under continuous disclosure rules.

In response, RFG said it did not think that news of the proposed bail-out would affect its share price. The company said it had told the market several times this year that it was working towards a deal to address its debt.

"Given the indicative and non-binding nature of the proposal received from Soliton Capital Partners, in RFG’s view, there is no new material information," RFG said in its response to the ASX.

"Rather, the information provides colour on the progress of discussions on debt reduction options being explored by RFG."

The additional information released on Tuesday was only to confirm or correct media reports, it said, adding that RFG's share price did not move materially after it confirmed the deal was in play.

The information provides colour on the progress of discussions on debt reduction options being explored by RFG.

RFG statement

RFG's shares - which were trading at $4.40 in 2017 - closed at 21¢ on Tuesday and opened at 20¢ on Wednesday. That is still up 40 per cent from their opening price on the previous Friday. Its shares closed on Thursday at 20¢.

A term sheet relating to Soliton's non-binding, indicative offer was signed on July 1, with due diligence still to take place, RFG said.

Vas Kolesnikoff, a corporate governance expert and head of Australian research at proxy advisors Institutional Shareholder Services, has said the massive price surge suggested news of the deal had leaked and that RFG should have either released the details to the market or put itself in a trading halt.

RFG has been in crises since The Age and SMH revealed that many of its franchisees were struggling to survive under its sharp business model.