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Taste to Raise up to R226 Million for Starbucks & Arthur Kaplan Declaration Announcement in respect of Rights Offer
TASTE HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 2000/002239/06)
Share code: TAS ISIN: ZAE000081162
(“Taste” or “the Company” or “the Group”)
TASTE TO RAISE UP TO R226 MILLION FOR STARBUCKS AND ARTHUR KAPLAN
DECLARATION ANNOUNCEMENT IN RESPECT OF THE TASTE RIGHTS OFFER
1. INTRODUCTION
Taste is pleased to announce that it intends to raise up to R226 393 428 by way of a
renounceable rights offer (“Rights Offer”). In terms of the Rights Offer, Taste will offer a
total of 75 464 476 new Shares (“Rights Offer Shares”) at a subscription price of 300
cents per Rights Offer Share (“Subscription Price”) in the ratio of 25 Rights Offer Shares
for every 100 Shares held at the close of business on the record date for the Rights Offer,
being Friday, 30 October 2015 (“Record Date”).
Furthermore, Shareholders are advised that the Company has received commitments from
certain existing shareholders that they will be following their rights to which they are, or will
become, entitled and in certain circumstances, will apply for excess rights, which
commitments are in excess of 70% of the Rights Offer Shares.
2. PURPOSE OF THE RIGHTS OFFER
The purpose of the Rights Offer is to provide Taste with additional capital of up to
R226 393 428 so as to realise the opportunities of:
2.1. Starbucks
As set out in the announcement released on SENS on 14 July 2015, wherein it was
disclosed that a subsidiary of Taste had signed an exclusive development agreement
to develop Starbucks outlets in South Africa, Taste envisages establishing 12 to 15
outlets within the first 24 months from the first store opening, which store is scheduled
for the first half of 2016. The Company will incur once-off and upfront costs relating to
initial training and travel, employment costs of a dedicated Starbucks team well in
advance of the first store opening, pre-opening marketing and market research and
establishing IT and other infrastructure. It is currently estimated these costs may
amount to R29 million, R25 million of which may be incurred in this financial year.
The capital expenditure and pre-opening expenses for the first 12 to 15 stores is
estimated at R108 million. The market opportunity is estimated at 150 to 200 outlets, at
a current estimated capital expenditure per store of R3 million to R10 million. This
initial measured roll-out should result in the business unit achieving EBITDA breakeven
during the second year after the first store opening. It is anticipated that a future store
growth of 20 stores per annum could be funded through internally generated funds and
debt. The target ten year internal rate of return at store level is 30%.
Since 1971, Starbucks has been committed to ethically sourcing and roasting high-
quality Arabica coffee. Today, with more than 22 000 stores around the globe,
Starbucks is the premier roaster and retailer of specialty coffee in the world. The
license agreement gives Taste the exclusive rights to develop Starbucks outlets in
South Africa. As Taste is the licensee, it will own and operate the stores directly.
Including renewal options, the agreement is for 25 years and includes certain rights for
other African countries, subject to certain conditions.
2.2. Arthur Kaplan
As set out in the announcement released on SENS on 21 October 2014, Taste
acquired the business of Arthur Kaplan, thereby becoming the leading retailer (by
number of outlets) of luxury Swiss watch brands in South Africa. Arthur Kaplan has
exceeded the Company’s expectations in both sales and profit performance since
acquisition and is poised for growth as overheads are largely fixed for the next five
stores. Additionally, the opportunities identified during the due diligence and expressed
as part of the acquisition rationale are materialising and include expanding the Arthur
Kaplan footprint through:
• opening new premium watch and jewellery outlets (which costs of shopfitting and
inventory investment range from R7 million to R15 million per outlet, depending on
the range of brands in the outlet), the first of which is scheduled for April 2016;
• refurbishing three existing outlets (at a cost of R1.5 million to R3 million per
refurbishment) and placing new premium watch brands into existing outlets (at an
inventory investment of R2 million to R7 million per brand with an estimated return
on investment in excess of 50%); and
• acquisition and conversion of attractively valued independent jewellers that operate
in the same consumer segment to the Arthur Kaplan brand. Purchase price
estimates are between R15 million and R30 million per outlet.
3. NATURE OF THE BUSINESS AND PROSPECTS OF TASTE
Taste is a South African based management group that owns and licenses a portfolio of
franchised and owned, category specialist and formula driven quick service restaurants,
coffee and luxury retail brands represented in over 550 outlets in Southern Africa.
Its food division licences the world’s leading coffee retailer and roaster, Starbucks, the
world’s largest pizza delivery chain, Domino’s, and owns South Africa’s leading fish take
away brand (by outlets), The Fish & Chip Co, in addition to Zebro’s Chicken, and Maxi’s.
(Scooters Pizza and St. Elmo’s Woodfired Pizza will be converted to Domino’s outlets).
Its luxury goods division owns NWJ, World’s Finest Watches and Arthur Kaplan. It is now
the leading retailer (by number of outlets) of luxury Swiss watches in the region, with brands
like Breitling, Hublot, Longines, Omega, Rado, Rolex and TAG Heuer among its custodian
brands.
Food Division
The food division consists of the consumer facing brands as mentioned above, as well as
Buon Gusto food services. The latter manufactures sauces, spices, dough premixes and
added value meat products for the Group’s food brands and distributes the majority of
products used by its food outlets. From April 2015 Buon Gusto food services also
manufacturers fresh pizza dough for Domino’s from specialised facilities in Midrand and
Cape Town and has also begun manufacturing burger patties from its now-expanded
manufacturing campus in Cullinan. All six trading consumer brands are underpinned by
strong value-for-money propositions within their target consumer market. Following the
Group’s announcement on SENS on 10 April 2014 that it had signed a 30-year Master
Franchise Agreement to develop the global Domino’s brand in South Africa and six other
countries, the first six Domino’s outlets were launched at the end of 2014. As of September
2015 there were 63 Domino’s branded outlets, 26 of which are corporate owned. The first
converted franchisee stores commenced trading under the Domino’s brand by the end of
May 2015. As set out in the announcement released on SENS on 14 July 2015, Taste has
secured the exclusive rights to Starbucks and has commenced brand establishment and
plans to roll out the first outlets in the first half of next year.
Luxury Goods Division
The acquisition of Arthur Kaplan in November 2014 has diversified Taste’s customer base
through increasing the Company’s representation in watches, a significant product
category, as well as allowing the group to access upper income consumers across watches
and jewellery. The luxury goods division is the only vertically-integrated and partly
franchised jewellery business in South Africa and owns and operates approximately 60% of
the outlets. The franchise services are comparable to the Taste food franchise business in
that they offer their franchisees operational and marketing support, project management,
new site growth and development, and national brand-building strategies in return for a
royalty. The distribution division distributes all of the goods sold through NWJ outlets. Of
these, approximately 40% is manufactured by the manufacturing facility in Durban, with the
remainder sourced through a combination of local and global supply chains. This model
provides in-house innovation capacity, fast routes to market and reduces input costs
through purchasing economies of scale. A further benefit of owning the manufacturing
facility is that slow-moving or returned stock can be either re-worked with negligible yield
loss or transferred to another location where there is known demand for the item.
Through Arthur Kaplan and Worlds’ Finest Watches the Group is now the leading retailer
(by number of outlets) of luxury Swiss watches in the region, with brands like Breitling,
Hublot, Longines, Omega, Rado, Rolex, and TAG Heuer among its custodian brands. More
recently it started retailing Montblanc accessories and writing instruments in two of its
Arthur Kaplan stores.
4. SALIENT TERMS OF THE RIGHTS OFFER
In terms of the Rights Offer, Taste will offer a total of 75 464 476 Rights Offer Shares at a
subscription price of 300 cents per Rights Offer Share in the ratio of 25 Rights Offer Shares
for every 100 shares held in Taste on the close of business on the Record Date.
Qualifying Shareholders will have the right to apply for Rights Offer Shares in excess of
their entitlements, on the same terms and conditions as those applicable in terms of their
entitlements.
Upon their issue, the Rights Offer Shares will rank pari passu in all respects with the
existing Taste Shares.
5. SALIENT DATES AND TIMES
2015
Rights Offer Declaration Data announcement released on
SENS Tuesday, 13 October
Rights Offer Finalisation announcement released on SENS Friday, 16 October
Last day to trade in Taste Shares in order to settle trades by
the Record Date for the Rights Offer and to qualify to
participate in the Right Offer (cum entitlement) on Friday, 23 October
Listing of and trading in the Letters of Allocation on the JSE
under JSE code TASN and ISIN ZAE000210092 commences
at 09:00 on Monday, 26 October
Taste Shares commence trading ex-rights on the JSE at
09:00 on Monday, 26 October
Circular and Form of Instruction posted to Certificated
Shareholders Tuesday, 27 October
Record date for the Rights Offer for purposes of determining
the Taste Shareholders entitled to participate in the Rights Friday, 30 October
Offer at the close of business on
Rights Offer opens at 09:00 on Monday, 2 November
Holders of Dematerialised Taste Shares will have their
accounts at their CSDP or broker automatically credited with
their Letters of Allocation on Monday, 2 November
Holders of Certificated Taste Shares will have their Letters of
Allocation credited to an electronic register at the Transfer
Secretaries on Monday, 2 November
Circular distributed to Dematerialised Shareholders, who
have elected to receive such documents Tuesday, 3 November
Last day to trade in Letters of Allocation in order to settle
trades by the Record Date for the Letters of Allocation and
participate in the Rights Offer at the close of business on Friday, 6 November
Last day for Form of Instruction to be lodged with the
Transfer Secretaries by holders of Certificated Taste Shares
wishing to sell all or part of their Rights Offer Entitlement by
12:00 on Friday, 6 November
Listing and trading of Rights Offer Shares commences on the
JSE at 09:00 on Monday, 9 November
Last day for Form of Instruction to be lodged with the
Transfer Secretaries by holders of Certificated Taste Shares
wishing to subscribe for or renounce all or part of their
Rights Offer Entitlement by 12:00 on (see note 2) Friday, 13 November
Record date for Letters of Allocation Friday, 13 November
Rights Offer closes at 12:00 and payment to be made on Friday, 13 November
CSDP/broker accounts credited with Rights Offer Shares and
debited with the payments due in respect of holders of
Dematerialised Taste Shares on Monday, 16 November
Rights Offer Share certificates in terms of the Rights Offer
posted to holders of Certificated Taste Shares via registered
post on or about Monday, 16 November
Results of Rights Offer announced on SENS on Monday, 16 November
CSDP/broker accounts credited with excess Rights Offer
Shares, where applicable, and debited with the payments
due in respect of holders of Dematerialised Taste Shares on Wednesday, 18 November
Rights Offer Share certificates in terms of the excess Rights
Offer Shares, where applicable, posted to holders of
Certificated Taste Shares via registered post on or about Wednesday, 18 November
Refund cheques posted to holders of Certificated Taste
Shares in respect of unsuccessful applications via registered
post on or about Wednesday, 18 November
Notes:
1. The above dates and times, which times are local times in South Africa, are subject to amendment. Any
such amendment will be released on SENS.
2. Holders of Dematerialised Taste Shares are required to notify their CSDP or broker of the action they
wish to take in respect of the Rights Offer in the manner and by the time stipulated in the agreement
governing the relationship between the Dematerialised Shareholder and his CSDP or broker.
3. Taste share certificates may not be dematerialised or rematerialised between Monday, 26 October
2015 and Friday, 30 October 2015, both days inclusive.
4. CSDPs effect payment in respect of holders of Dematerialised Rights Offer Shares on a delivery versus
payment basis.
5. To the extent that the rights are accepted, Dematerialised Shareholders will have their accounts at their
CSDP automatically credited with their rights and Certificated Shareholders will have their rights
credited to an account at Computershare Investor Services.
6. Rights Offer share certificates to be issued in terms of the Rights Offer will be posted to persons entitled
thereto, by registered post, at the risk of the Certificated Shareholders concerned.
6. RESTRICTIONS ON THE RIGHTS OFFER
Any Shareholder resident outside the Common Monetary Area, being the Republics of
South Africa and Namibia and the Kingdoms of Lesotho and Swaziland, who receives the
Rights Offer circular and accompanying form of instruction, should obtain advice as to
whether any governmental and/or any other legal consent is required and/or any other
formality must be observed to enable such a subscription to be made in terms of such form
of instruction.
The Rights Offer does not constitute an offer in any jurisdiction in which it is illegal to make
such an offer and the Rights Offer circular and accompanying form of instruction should not
be forwarded or transmitted any person in any territory other than where it is lawful to make
such an offer.
The Rights Offer Shares have not been and will not be registered under the Securities Act
of the United States of America. Accordingly, the Rights Offer Shares may not be offered,
sold, resold, delivered or transferred, directly or indirectly, in or into the United States or to,
or for the account or benefit of, United States persons, except pursuant to exemptions from
the Securities Act. The Rights Offer circular and the accompanying documents are not
being, and must not be, mailed or otherwise distributed or sent in, into or from the United
States. The Rights Offer circular does not constitute an offer of any securities for sale in the
United States or to United States persons.
The Rights Offer contained in the Rights Offer circular does not constitute an offer in the
District of Columbia, the United States, the Dominion of Canada, the Commonwealth of
Australia, Japan or in any other jurisdiction in which, or to any person to whom, it would not
be lawful to make such an offer (“Non-qualifying Shareholder”). Non-qualifying
Shareholders should consult their professional advisers to determine whether any
governmental or other consents are required or other formalities need to be observed to
allow them to take up the Rights Offer, or trade their entitlement. To the extent that Non-
qualifying Shareholders are not entitled to participate in the Rights Offer, such Non-
qualifying Shareholders should not take up their Rights Offer entitlement or trade in their
Rights Offer entitlement and should allow their rights in terms of the Rights Offer to lapse.
7. FURTHER ANNOUNCEMENT AND CIRCULAR
The Rights Offer Finalisation Announcement is expected to be released on SENS on or
about 16 October 2015.
The Rights Offer circular, and accompanying form of instruction for use by certificated
Shareholders only, containing full particulars of the Rights Offer will be posted to
shareholders on or about 27 October 2015.
The Rights Offer circular containing full particulars of the Rights Offer will be distributed to
dematerialised Shareholders who have elected to receive such documents on or about
3 November 2015.
Johannesburg
13 October 2015
Sponsor, Corporate Advisor and Book Runner
Merchantec Capital
Forward Looking Statement:
This announcement contains certain forward looking statements. These forward-looking
statements are not historical facts but rather are based on the Company’s current expectations,
estimates and projections about the industry in which Taste operates, and beliefs and
assumptions regarding the Company’s future performance. Words such as “anticipates”,
“expected”, “intends”, “plans”, “believes”, “seeks”, “estimated”, “potential” and similar
expressions are intended to identify forward-looking statements. These statements are not
guarantees of future performance and are subject to known and unknown risks, uncertainties
and other factors, some of which are beyond the control of the Company, are difficult to predict
and could cause actual results to differ materially from those expressed or forecasted in the
forward-looking statements. Taste cautions shareholders and prospective shareholders not to
place undue reliance on these forward-looking statements, which reflect the view of Taste only
as of the date of this announcement. The forward-looking statements made in this
announcement relate only to events as of the date on which the statements are made. Taste will
not undertake any obligation to release publicly any revisions or updates to these forward-
looking statements to reflect events, circumstances or unanticipated events occurring after the
date of this announcement except as required by law or by any appropriate regulatory authority.
Date: 13/10/2015 08:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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