TASTE HOLDINGS LIMITED - Acquisition of Arthur Kaplan Jewellers and Withdrawl of Cautionary

Acquisition of Arthur Kaplan Jewellers and Withdrawl of Cautionary

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

ACQUISITION OF ARTHUR KAPLAN JEWELLERS AND WITHDRAWAL OF CAUTIONARY

1. INTRODUCTION
Shareholders are referred to the cautionary announcement dated 25 September 2014
and are advised that Taste has entered into a sale of shares agreement to acquire
the entire issued share capital of AKJ Holdings Proprietary Limited from The
Crown Jewel Trust and The Kenilworth Park Trust (“the sellers”) (“the
acquisition”).

2. NATURE OF THE BUSINESSES OF AKJ HOLDINGS PROPRIETARY LIMITED
AKJ Holdings Proprietary Limited is a leading luxury watch and jewellery retailer
that owns and operates eleven outlets located in major shopping centres within
South Africa. AKJ Holdings Proprietary Limited owns ten Arthur Kaplan branded
outlets and one World’s Finest Watches outlet and is the leading retailer of
Swiss watches in South Africa. Arthur Kaplan has in the last 40 years established
a reputation in the retail watch market as a stockist of premium luxury brands
including Rolex, Breitling, Omega, Tag Heuer and Longines and is one of the few
retailers in the marketplace to stock these leading brands in multiple outlets.
Arthur Kaplan retails a number of other leading luxury watch brands as well as a
selection of fashion watch brands.

Arthur Kaplan also retails luxury fine jewellery in 18ct and 9ct gold, platinum
and silver that appeals to aspirational affluent consumers. It does so within
collections under the Arthur Kaplan brand name with a focus on bridal and
engagement pieces.

Since opening in 2002, World's Finest Watches has, as the only specialist
prestige watch boutique in Sandton, become an established destination for watch
enthusiasts and collectors. World’s Finest Watches specialises in prestige brands
like Rolex, Hublot, Omega and Tag Heuer.

At the age of 18, Arthur Kaplan entered the family business, a jewellery store
which his grandfather established in Pretoria in 1889. In 1973, after working in
the family business for 15 years he opened his own jewellery store in Pretoria
and so the Arthur Kaplan brand was born. With more than 40 years brand equity,
the Arthur Kaplan brand has an outstanding reputation for being exceptional
custodians of the world’s finest watch brands, as well as being a fine jeweller
of distinction renowned as a trusted destination for diamond engagement rings.

3. RETENTION OF MANAGEMENT
Mr. Dean Divaris, from whose family trust Taste is buying a portion of the
shares, has been leading Arthur Kaplan for the last 14 years. Mr. Divaris will
remain in his capacity as Managing Director of the Arthur Kaplan business and
will continue to drive the business expansion in line with a shared growth plan
developed between Taste and Mr. Divaris.

4. STRATEGIC RATIONALE FOR THE ACQUISITION
Arthur Kaplan’s “affluent aspirational” target market is complementary to Taste’s
view that, to compete in the upper income consumer market, it should be done with
the best brands in their categories. Arthur Kaplan is the leader in the luxury
Swiss watch segment in South Africa. Taste currently manages over 25 watch brands
in its existing business and retails these in over 77 locations in Southern
Africa.

Arthur Kaplan’s jewellery offering, while not its current dominant revenue
category, represents about 40% of the revenue in its stores. The range of
jewellery is aligned with Taste’s current manufacturing capability and Taste
believes there is upside potential to grow Arthur Kaplan’s jewellery offering and
its revenue contribution.

There is scope for growth in store numbers within the South African market as
well as scope to satisfy demand for luxury Swiss watches in sub-equatorial
Africa. This market is currently underserved by dedicated retail offerings and
this African focus and opportunity is aligned with that of the broader Taste
group.

5. PURCHASE CONSIDERATION
The purchase consideration is R85 million and will be settled in cash.
Additionally if the profit after tax of AKJ Holdings Proprietary Limited for the
period from 1 July 2014 to 30 June 2015 (“PAT”) exceeds R12.386 million (“target
amount”), the purchase consideration shall be increased by R4.21 for every R1.00
with which the PAT exceeds the target amount, up to a total additional amount of
R35 million. Any savings made or additional expenses incurred as a result of the
transfer of ownership to Taste will be excluded from this PAT calculation.

6. OTHER SALIENT ITEMS
6.1. The effective date of the acquisition is the first business day after the
      date of fulfilment of the last suspensive condition.
6.2. For the year ended 30 June 2014 AKJ Holdings Proprietary Limited recorded
      revenue of R224.3 million, EBITDA of R18.1 million and adjusted profit
      after tax of R12.4 million.
6.3. The acquisition is expected to be earnings enhancing to Taste from the
      first period of consolidation.
6.4. The value of the net assets that are the subject of the transaction as at
      30 June 2014 was R51.3 million and this value is not expected to change
      materially before the effective date.
6.5. The acquisition is a category two transaction in terms of the Listings
      Requirements of the JSE Limited (“LR”).
6.6. Subsequent to the acquisition of AKJ Holdings Proprietary Limited, the
      Memorandum of Incorporation of AKJ Holdings Proprietary Limited and its
      subsidiary companies will be reviewed to ensure that they do not prevent
      Taste from complying with its obligations in terms of the LR.

7. SUSPENSIVE CONDITIONS
The transaction is subject to certain suspensive conditions normal with a
transaction of this nature, including regulatory approval, Taste board and
seller’s trustees’ approval as well as Taste being satisfied with the outcome of
the due diligence, which conditions are expected to be fulfilled by 1 December
2014.

8. WITHDRAWAL OF CAUTIONARY
Shareholders are referred to the cautionary announcement issued on SENS on
25 September 2014 stating that Taste has entered into negotiations in respect of
a possible acquisition. Following this announcement the cautionary is withdrawn
and shareholders are no longer required to exercise caution when dealing in the
company’s securities.


Johannesburg
21 October 2014

Sponsor
Merchantec Capital

Legal advisor to Taste
Eversheds Attorneys

Legal and Corporate Advisor to the Sellers
Rabin And Associates Proprietary Limited

Attorneys to the Sellers
Hogan Lovells

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