ASIC to probe Retail Food Group as $160 million deal emerges

Disgraced franchisor Retail Food Group (RFG) is today staring down the barrel of even more regulator scrutiny after ASIC confirmed it is looking into whether the company has failed to be transparent with investors.

The publicly traded company has been making headlines this week after a meteoric rise in its share price prompted questions over whether a sell-off was in the works.

The company told investors on Monday it wasn’t aware of any information it had not announced that could explain the more than 70% share rise, but just a day later spilled the beans on a $160 million deal to recapitalise the company.

It pointed to a news.com.au interview with executive chairman Peter George when asked for a please explain, despite the fact RFG’s shares were already soaring by the time the story was published last Friday.

RFG did also say “advanced discussions” were underway on a deal to reduce the company’s debt on Monday.

RFG is under the pump to pay down more than $259 million in debt after convincing its banks to stick around earlier this year. The company has previously said it was exploring options, including a possible sell-off of non-core assets.

But news on Tuesday evening that Soliton Capital Partners, an investment fund associated with SSG Capital Management, has been granted limited exclusivity to conduct due diligence has seemingly raised eyebrows over at ASIC.

The corporate regulator is looking into whether RFG breached its disclosure obligations after it told investors it was not aware of a forthcoming deal while, at the same time, saying discussions were advanced on a deal.

The probe was characterised by the regulator as routine on Thursday morning, with a spokesperson confirming it’s not linked to any other possible investigations underway into the company.

SmartCompany was told ASIC typically reviews abnormal market activity and that its review of RFG’s disclosure practices was not a fully-fledged “investigation”.

Earlier this year, a Senate inquiry into the scandal-plagued franchising sector recommended RFG be investigated by ASIC, the ACCC and the ATO in a scathing assessment of the company.

The allegations, according to senators, relate to concerns about insider trading, with directors past and present under the microscope.

The ACCC is currently looking into whether the franchisor breached Australian Consumer Law or elements of the Franchising Code of Conduct.

It is not the first time RFG shares have inexplicably risen prior to a major company announcement being publicised. Back in March, shares rose over 60% in the week before the company announced it had renegotiated its debt facilities.

All this restructuring is a consequence of the fallout from a 2017 Fairfax Media investigation into allegations of widespread franchisee exploitation within the company’s vast network of brands, including Donut King, Gloria Jeans, Michel’s Patisserie and Brumby’s Bakery.

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