TASTE HOLDINGS LIMITED - Acquisition of the Zebros chicken business announcement and withdrawal of cautionary

Acquisition of the Zebro’s chicken business announcement and withdrawal of cautionary

TASTE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2000/002239/06)
JSE code: TAS   ISIN: ZAE000081162
(“Taste" or "the company")

ACQUISITION   OF   THE   ZEBRO’S   CHICKEN   BUSINESS   ANNOUNCEMENT   AND   WITHDRAWAL   OF
CAUTIONARY

1.      INTRODUCTION AND EFFECTIVE DATE
Shareholders are referred to the cautionary announcement, dated 13 December 2013,
and are advised that Taste, through a wholly owned subsidiary has entered into a
sale of business agreement to acquire the business operated under the brand name
Zebro’s Chicken(“the acquisition”).

The effective date of the acquisition is 1 March 2014 and all of the suspensive
conditions have now been fulfilled.

2.      NATURE OF THE BUSINESS OF ZEBRO’S CHICKEN
Zebro’s Chicken is a 15-year old brand located mainly in the Western and Eastern
Cape, represented through 40 outlets. It is unique in the South African chicken
market in that it prepares its products over an open fire similar to a South
African ‘braai’, and has a unique flavour profile in the chicken market. It is
arguably the only chain of its size using this preparation method and flavour
profile. It has since inception targeted mainly the lower income consumer (Living
Standards Measure “LSM” 4-6) through low prices and large portions. Its core menu
consists of chicken on the bone, chicken burgers, russian-style sausages, fresh-
cut chips and assorted salads. Its limited menu and simple preparation method
result in the lowest set-up costs for new stores in its category as well as
simplified in-store operations. This makes the brand accessible to a wider
audience of franchisees and promotes multiple store ownership. Current site
locations include shopping malls, rural towns, taxi-ranks, as well as selected
higher LSM locations. (www.zebros.co.za)

3.    RATIONALE FOR THE ACQUISITION
The acquisition follows Taste’s stated strategy of acquiring:
   - businesses that have significant overlap with the group’s existing vertical
      integration capacity in both manufacturing and distribution; and
   - additional brands targeting consumers in the LSM 4-6 category, thereby
      complementing the over 300 store The Fish & Chip Co. business.

As such the rationale for the acquisition is as follows:
3.1. Zebro’s targets lower LSM consumers, a market that is currently underserved
      by formalised quick service restaurant (“QSR”) brands;
3.2. its trading format is similar to other existing Taste food brands in that:
3.2.1. it has the lowest set-up costs in the chicken segment, which targets
        similar franchisees to those of the existing The Fish & Chip Co.
        business;
3.2.2. its focused menu results in easy to manage operations which promotes
        multiple- and company store ownership; and
3.2.3. its site criteria are similar to those of The Fish & Chip Co. brand,
        allowing leverage into the existing national property infrastructure of
        the Taste group;
3.3. as the current Zebro’s business is not vertically integrated there is
      substantial value to be unlocked by adding its volume to existing Taste
      capabilities;
3.4.   there is significant opportunity for expansion of the brand within South
       Africa. The current footprint does not include any meaningful penetration
       outside of the Western and Eastern Cape. Taste envisages accelerated store
       growth due to Zebro’s similarity to its existing The Fish & Chip Co.
       business;
3.5.   the ability to leverage the existing Taste franchisee base and by utilising
       the national property; and
3.6.   the acquisition is expected to be earnings enhancing to Taste from the
       first year of consolidation.

4.     OTHER SALIENT DETAILS
4.1.   The purchase price is R17 million and will be discharged by a combination
       of cash and vendor placed Taste shares. 50% of the purchase price will be
       discharged by way of Taste shares issued to the vendors on 3 March 2014 the
       number of shares being calculated using a 5% discount to the 30 day volume
       weighted average price on 28 January 2014.
4.2.   Mr John Hickman, a co-founder, will remain employed by Zebro’s for at least
       one year from the effective date.
4.3.   Due to its relative size, the acquisition falls below the threshold of a
       categorised transaction in terms of the Listings Requirements of the JSE
       Limited and its announcement is therefore voluntary. The board of directors
       of Taste however deemed it appropriate to provide shareholders with the
       salient features of the acquisition.


5.   WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are hereby advised of the withdrawal of the cautionary announcement
issued on 13 December 2013 and caution is no longer required when dealing in the
company’s securities.

Johannesburg
29 January 2014

Sponsor
Merchantec Capital

Legal advisor to Taste
Eversheds Attorneys

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