United Petroleum may be hungry to take out Retail Food Group

A Cibo Espresso coffee shop on Melbourne Street in North Adelaide.

Retail Food Group’s acquisition of Cibo Espresso may be small change, but it could be just what the company needed to keep a suitor at bay.

Adelaide café chain Cibo Espresso was purchased from Adamantem Capital’s Retail Zoo for a total investment of $2.7m, the company said on Monday.

On the face of it, it’s an obvious deal.

The cost of living crisis means consumers are cutting back on café spending, placing pressure on smaller market players.

RFG, which has brands including Donut King, Gloria Jeans, Michel’s Patisserie, Brumby’s Bakery, Crust Gourmet Pizza and Rack ’Em Bones, could be a well-placed industry consolidator or benefit from the disappearance of other competitors.

But perhaps something else could also be at play.

Its largest shareholder, Pie Face owner United Petroleum Group, run by Avi Silver, has increased its position to 12.36 per cent from 11.3 per cent, as disclosed on October 15.

It fuels fears it will try to buy the $170m RFG at an opportunistic price.

United, which is known to be a keen buyer of the business at the right price, could come forward an offer at 10c a share, when its share price is currently 6.8c.

Investors who have been there for the long haul may see it as a good opportunity to just bail out of the stock and agree to the terms.

This is even though the price would likely be viewed as highly opportunistic by the company still in the rebuilding phase.

Franchising is a tough industry, but RFG has recovered from most of its past challenges, which include losses and a probe from the Australian Competition and Consumer Commission over its dealings with its franchisees.

For the year to June it generated a $5.8m net profit after generating a loss in the previous corresponding period.