If you haven’t heard much about Freedom Foods Group Ltd (ASX: FNP) in a while, it’s no surprise. Freedom shares have been stuck in ASX purgatory – i.e. a share trading halt – since 24 June. That’s more than 5 months ago.
Freedom shares initially had a strong 2020, rising to $5.68 in April on the back of strong demand for its products. This was amidst the panic hoarding we saw in supermarkets back in March and April. But the shares last traded for just $3.01 before the trading halt came into place.
Freedom Foods was placed in a halt due to some serious developments at the company over the first half of the year. Firstly, Freedom was forced to write down around ~$60 million on its balance sheet due to shonky auditing of its food stockpiles. Somehow, it was missed that piles of Freedom Foods foodstuffs have gone off or were out of date.
It also revealed that it would need to further provision bad debts, which was reported at the time to likely result in another $10 million in write-downs.
Then, both its chief executive officer and chief financial officer announced they would be stepping down from the company. That came just a few days after the CEO, Rory McLeod, announced he would be going ‘on leave’.
If you’re searching for a word for this whole cacophony of news, ‘debacle’ would probably fit nicely. Mr McLeod left the company and was replaced by Michael Perich. The Perich family reportedly controls 52.5% of Freedom Foods’ equity through a private company.
Freedom isn’t free
But that was all months ago. So what’s new from Freedom Foods? Reporting in the Australian Financial Review (AFR) today tells us that the company is likely to remain in a suspension for “several more weeks”. This is reportedly due to Freedom finalising a convertible notes deal with Oaktree Capital Management – a US-based firm. According to the report, Freedom is seeking a $200 million capital injection.
The AFR also reports that Freedom is “believed to be seeking” a sale of its non-core cereals, snack and canned seafood business as part of a restructure. It will instead focus on the “dairy/nutritionals” as well as “plant-based businesses”, which the AFR tells us are worth 50% and 44% of the group’s earnings base respectively. The AFR says that Freedom’s muesli division alone could fetch between $30 million and $50 million, including the sale of its Leeton factory.
It will be interesting to see how the Freedom Foods share price emerges.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Freedom Foods Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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