PAG eyeing Australia-based Retail Food Group’s pizza business

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Hong Kong-based private equity form PAG is said to be in talks to buy Australia’s third largest pizza chain, Crust Grourmet Pizzas from its operator, ASX-listed Retail Food Group via an auction, according to a report by Australia Financial Review (AFR).

The news followed closely after Retail Food Group announced last December the resignation of its group CEO Richard Hinson as part of a major restructuring to renew its focus on serving franchise and non-franchise customers by reducing costs.

Headquartered in Queensland, Retail Food Group claims to be Australia’s largest multi-brand retail food franchise owner, where it operates Brumby’s, Donut King, Crust Gourmet Pizza, Michel’s Patisserie and Gloria Jean’s.

However, business is not faring well for Retail Food Group as its retail food businesses have reported a full loss last year. It has decided to cloase between 160 and 200 Australian outlets by end of 2019 financial year due to high rents and declining shopping centre performance.

In an email reply to DEALSTREETASIA, Retail Food Group said it noted the potential sale of assets by the company, including Crust Gourmet Pizzas, to reduce its debt by various means.

“That process is ongoing, though no formal binding agreement has been reached with any buyer at this stage in respoect of any of Retail Food Group’s assets. In so far as an amount for the sale of Crust Gourmet Pizza is speculated in the AFR article, that amount exceeds Retail Food Group’s expections as to the sale price for that asset if it was to be sold as a part of that process,” said the global food and beverage company.

Meanwhile, PAG declined to comment on market speculation.

Retail Food Group was listed on the ASX in 2006, and subsequently built a reputation of serious franchise players as it spent more than $500 million in the past decade on acquisitions for the food and coffee brands. But it has been under pressure since an investigation by Fairfax Media revealed that its franchise business are suffering, as many stores are put up for sale by its franchisees.

Meanwhile, PAG, fresh from raising its third Asia-focused private equity buyout fund at $6 billion, is no stranger to the market in Down Under. It already has an office in Australia but focused mostly on real estate and debt deals.

In 2017, it bought The Cheesecake Shop for $76 million and is said to have taken a close look at Australia’s biggest private radiology business I-MED, before it was sold to European private equity firm for $1.3 billion, based on a report by Australia Financial Review, adding that PAG is looking to strengthen its buyout presence in Australia by hiring more senior dealmakers for its Australian office.

PAG, an Asia-focused investor that manages $30 billion in capital, has funds under management across private equity, real estate and absolute return strategies. It operates in multiple markets including Australia, China, India, Japan, South Korea and Southeast Asia. Its two other investment strategies include real estate and absolute returns.

While PAG Real Estate has invested over $21 billion in more than 6,500 properties across the region, the absolute return business currently manages in excess of $5.5 billion and has invested over $7 billion within the past 10 years.

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