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TASTE HOLDINGS LIMITED - Taste to Focus on Food in the Future

Release Date: 04/04/2017 16:50
Code(s): TAS     PDF:  
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Taste to Focus on Food in the Future

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 FOCUS ON FOOD IN THE FUTURE



1. RATIONALE FOR THE STRATEGIC RESTRUCTURE
   The last three years have been transformational for the Group. Through acquisitions and
   the winning of global licences, Taste has undergone a significant transformation, from a
   pure franchisor company of local brands, to a predominately corporate-owned-store
   business with a mix of global and local brands. This transformation has challenged the
   Group to adapt to a very different financial and operating model.
   A recent Strategic review by the Board has concluded that the Group should concentrate
   future investments, and management efforts on rapidly growing the Food business, where
   returns are high and opportunities abound. The Luxury Goods and Food businesses are
   very different in their maturity, capital returns, and working capital requirements. In
   particular, the Food business, with the recent Starbucks and Domino’s investments, looks
   much like a start-up and therefore requires more equity than debt to grow, whilst the Luxury
   Goods division, a mature and established business requires the opposite to capitalise on its
   growth prospects.
   The Board has therefore concluded that these businesses will best be served by having
   separate shareholders and management teams and be allowed to reach their full potential
   independently. This will most likely result in the sale of the Luxury Goods Division during
   this year.
   It is therefore envisaged that post this strategic restructure, Taste will be a focused food
   business, both owning and licensing leading global brands. Appropriate to a start-up, it will
   initially be debt free, with necessary cash on hand to accelerate its Starbucks and Domino’s
   roll-out. This singular focus will allow Taste to pursue opportunities to license further
   international food brands, selectively vertically integrate, and expand its existing portfolio of
   brands in South- and Southern Africa.

2. PROPOSED AMENDMENTS TO THE MEMORANDUM OF INCORPORATION
   As part of the strategic restructuring of Taste, the Company intends to raise equity which in
   addition to the proceeds from the sale of the Luxury Goods Division, will be applied to
   reducing all existing debt and to building new Starbucks and Domino’s outlets. The
   Company will thus be required to amend its Memorandum of Incorporation in order to
   convert its par value shares to no par value shares and increase the authorised share
   capital of the Company. Furthermore, in order to provide for an alternative form of future
   capital, (which is not currently envisaged) the Board has also put forward an amendment for
   the inclusion of preference share capital in the authorised share capital of the Company.
   Accordingly, Taste will be proposing the relevant amendments to the Memorandum of
   Incorporation in a circular to shareholders.

3. THE CLAW-BACK OFFER
   All Taste shareholders and/or their renouncees will be offered the right to claw-back (i.e.
   subscribe for) their pro rata portion, by way of a renounceable claw-back offer, of the claw-
   back shares. The claw-back shares will be offered to shareholders subject to the terms and
   conditions set out in the claw-back offer circular to be issued once the amendments to the
   Memorandum of Incorporation have been effected. A total of 80 000 012 Taste shares will
   be offered in the claw-back offer at a claw-back offer price of R1.50 per share.
   Shareholders will not be obliged to take up their full allocation of claw-back shares, and
   may take up part only. Shareholders or their renouncees in terms of the claw-back offer will
   be entitled to participate in the claw-back offer.
   The claw-back offer will be fully subscribed by the Riskowitz Value Fund LP, a partnership
   formed in the state of Delaware, USA which has delegated its investment management and
   decision-making to Protea Asset Management LLC (“Protea”) as the investment adviser
   (“Subscriber”) in terms of the claw-back subscription agreement entered into between
   Taste and the Subscriber (the “Agreement”). Qualifying shareholders will not have the right
   to apply for claw-back offer shares in excess of their entitlements.
   The Agreement is subject to the following conditions precedent:
   3.1.   the Taste shareholders waiving their rights to receive a mandatory offer from the
          Subscriber as per paragraph 4 below; and
   3.2.   the Companies and Intellectual Property Commission approving and registering the
          amendments to the Memorandum of Incorporation as per paragraph 2 above.

   Upon their issue, the claw-back offer shares will rank pari passu in all respects with the
   existing Taste shares.

4. MANDATORY OFFER AND WAIVER
  Protea and Conduit Capital Limited (“Conduit”), together are the investment advisers and
  decision makers of entities that hold shares in Taste (“Entities Under Common Control”).
  As per the circular sent to Conduit shareholders on 29 September 2016, Conduit acquired
  100% of Snowball Wealth Proprietary Limited. The effective date of this acquisition was 30
  March 2017 and through this acquisition Conduit indirectly acquired Taste ordinary shares at
  a value of R1.94 per Taste ordinary share (“Snowball Acquisition”). Following this
  acquisition the Entities Under Common Control hold 34.9% of the issued ordinary shares in
  Taste.
  The proposed claw-back offer may result in the Entities Under Common Control, acquiring
  more than 35% of the voting rights of Taste, being the prescribed percentage in terms of
  section 123(5) of the Companies Act, 2008 (Act 71 of 2008), as amended (“Companies
  Act”). In such event, in terms of section 123 of the Companies Act, the Entities Under
  Common Control would be obliged to make an offer to all remaining shareholders of Taste
  (“Remaining Shareholders”) at the highest price paid for a Taste ordinary share by the
  Entities Under Common Control in the six month period prior to the closing of the claw-back
  offer, being the Snowball Acquisition price (“Mandatory Offer”). Shareholders may waive
  their right to the Mandatory Offer in accordance with Takeover Regulation 86(4) (the
  “Waiver”).
  The intention of the Entities Under Common Control is not to obtain control of Taste and
  they are therefore not willing to make the Mandatory Offer and have consequently entered
  into a claw-back subscription agreement on the basis that their subscription for the claw-
  back shares is conditional on the Remaining Shareholders waiving the Mandatory Offer.
  In order to achieve the desired capitalisation of the Company, in line with its focused
  strategic direction, the Remaining Shareholders will be requested to waive their right to
   receive the Mandatory Offer by way of an ordinary resolution to be proposed at a general
   meeting. The resolution must be approved by the independent holders of more than 50% of
   the general voting rights of all the issued shares, present and voting or represented by
   proxy.
   The Entities Under Common Control and any associates will not be able to vote on this
   resolution.

5. CIRCULAR AND FURTHER ANNOUNCEMENTS
    The circular relating to the amendments to the Memorandum of Incorporation and waiver of
    Mandatory Offer will be posted in due course and the full claw-back offer declaration
    announcement will be released on SENS post the general meeting.

Johannesburg
4 April 2017

Sponsor and Corporate Advisor
Merchantec Capital

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