Freedom Foods turns to Arrovest to save it from financial ruin

Freedom Foods has suffered more hiccups in its bid to get its operations back on track, including the collapse of negotiations with a potential new white knight.

Freedom Foods has to recapitalise the company after finding massive irregularities in its financial accounts.

FREEDOM Foods’ negotiations with a potential new white knight to recapitalise the troubled food and beverage manufacturer have collapsed.

Freedom Foods, which shocked the sharemarket when it announced massive losses in late November, has announced an in-principle agreement with its major shareholder Arrovest Pty Ltd after asking it to step in and fill the void.

Arrovest is the family investment company of the Perich family, whose members include re-elected Freedom Foods director Tony Perich, retiring director Ron Perich and interim chief executive officer Michael Perich.

Freedom Foods chairman Perry Gunner, who stepped down as a director at the company’s delayed annual general meeting today, said the collapse in negotiations with the unnamed potential new investor was “unexpected and disappointing”.

“Unfortunately, the potential investor, the company and our banks were not able to agree acceptable terms,” Mr Gunner said.

The Freedom Foods board had been working on a convertible note structure as the best option to recapitalise the company after announcing losses of $174.5 million for 2019-20 and revising its previously announced profit for 2018-19 to a $145.8 million loss after discovering irregularities in its accounts.

Its former managing director Rory Macleod and chief financial officer Campbell Nicholas both resigned from the company last June after the board became aware of the irregularities.

Mr Perry told today’s AGM the recapitalisation involving Arrovest — which had yet to be finalised — was also based on an issue of secured convertible notes.

Shareholders who met the wholesale investor requirements under the Corporations Act would be able to participate in the convertible notes on an equal terms as Arrovest.

Freedom Foods was also investigating ways in which other shareholders could participate in the recapitalisation.

Arrovest would invest a minimum of $100 million and up to $200 million in the convertible notes, depending on uptake from other shareholders.

“This funding will provide Freedom Foods with sufficient working capital and a stable capital structure to enable us to continue our financial and operational turnaround,” Mr Gunner said.

But the move did not placate some shareholders.

“Why would I invest in a recapitalisation when the board treats its communications with shareholders with such disdain?” one shareholder asked.

“We are not mushrooms to be kept in the dark and fed manure.”

Shareholders delivered Freedom Foods a “first strike” on passage of its remuneration report in response to the financial scandal which has engulfed the company.

The remuneration report failed to get the required 75 per cent of votes required to stave off a “first strike” under government rules to lift governance in listed companies.

A second strike on the 2020-21 remuneration report expected later this year would result in a spill of the board.

Three board members — Mr Gunner, Ron Perich and Trevor Allen — retired from the board at the AGM.

New board director Genevieve Gregor became new chairwoman of Freedom Foods after the AGM.

Ms Gregor said trading in Freedom Foods shares on the Australian Securities Exchange would remain suspended until after documentation on the recapitalisation had been finalised and/or after the first half results were released at the end of February.

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