Extra topping: Crust scores an extra $17 million slice from Retail Food Group

Just two months after former Smart50 entrant Crust Gourmet Pizza Bars scored a $24 million acquisition from Retail Food Group, it’s won another $17 million after the franchise giant got a closer look at the company’s books – and is satisfied the money is flowing nicely.

RFG announced to the market this morning that given expected returns for the next three years, a more valuable agreement worth $41 million has now been made to better value the business and its performance.

The move is a big win for the pizza franchise, which started as a family business and then expanded into a chain with multiple locations along the east coast.

Founders Michael Logos and Costa Anastasiadis were recently valued at $18 million in the BRW Young Rich list – the bigger acquisition price will surely expand that figure.

In its original statement, RFG said Crust would provide $7.5 million in EBIT for 2013.

The purchase will be partly funded by a $38 million share placement, it also said. The company is now in a trading halt pending an update on the agreement.

“Furthermore, but subject to the Crust business under RFG stewardship meeting certain performance hurdles relevant to the 24 months following completion, the vendors are entitled to additional payments to a maximum $4 million,” RFG said.

Changes to the agreement also mandate a settlement before October 30, with payment to be made in two tranches: $25 million in the form of $22 million in cash and the rest in shares, and $16 million in December in the form of $12 million cash and the rest in shares.

RFG chief Tony Alford said the due diligence “provided further comfort” the acquisition is a valuable one.

“The revised SPA terms provide certainty to all stakeholders whilst also reaffirming RFG’s basic acquisitive prerequisites that all target businesses are earnings-per-share accretive and provide a sustainable platform for earnings growth.”

Crust chief executive Michael Logos also said the new terms “validate our own views regarding the vitality and prospects of the Crust system, whilst also ensuring the alignment of RFG and vendor objectives”.

The purchase will be partly funded by a new share raising, RFG said. Petra Capital will manage the $38 million raising, most of which will be dedicated to the Crust acquisition.

Tony Alford also says that as a consequence of the revised transaction terms, the timing of the payment has been brought forward a minimum of 12 months.

Shares in RFG will be suspended until the completion of the placement, with the company expecting trading to resume on Monday.