TFG – Can TFG take RAG to riches?

TFG announced the acquisition of an Australian retailer, Retail Apparel Group (RAG). In this note we consider this deal, and estimate that the return on investment for the private equity seller may be between 7.1% to 12.5% p.a., which raises questions as to why they would dispose of this retail business delivering higher double-digit topline and profit growth. We conduct on-the-ground research in Melbourne, Australia, and engaged a menswear fashion stylist to visit RAG stores and provide views of the chains which may explain its strong growth in a very tough market.