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Terms of Intended Debt Reduction and Capital Raising, Withdrawal of Cautionary and Notice of General Meeting
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”)
TERMS OF INTENDED DEBT REDUCTION AND CAPITAL RAISING, WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENT AND NOTICE OF GENERAL MEETING
1. INTRODUCTION
Shareholders are referred to the cautionary announcement released by the Company on 29 September
2017 and the subsequent renewal thereof released on 10 November 2017, wherein the board of
directors of Taste (the “Board”) advised shareholders, inter alia, that the Company is evaluating
alternatives to settle its debt which may have a material effect on the price of the Company’s securities.
Earlier this year Taste announced its intention to restructure its food and luxury goods operating
divisions with a view to separating them in the future. Part of this intended restructure would see the
Group settle, in addition to other debt, its long term bond debt of R225 million senior secured notes
issued by the company in terms of the R1 000 000 000 Domestic Medium Term Note Programme
(“Notes”) and utilise surplus cash resources to fund the continued roll out of Domino’s and Starbucks
stores. Having initiated a sale process of the luxury goods division earlier in the year, deteriorating
macro-economic conditions meant that the timing of the disposal was not ideal and the Group therefore
stopped the sale process.
The continued roll-out of Starbucks and Domino’s stores is necessary for the food division to achieve
EBITDA profitability. In anticipation of a moderate consumer recovery next year and on the basis that
the planned Starbucks and Domino’s corporate stores are opened, the food division would be
positioned to achieve a monthly cash breakeven in the second half of next year.
As part of the debt reduction the Company will raise R398 million by way of a Rights Offer at 90 cents
per share. The Rights Offer will be fully subscribed for in terms of a commitment agreement that the
Company will enter into with Riskowitz Value Fund LP (“RVF”), (the “Commitment Agreement”). RVF,
together with its affiliates, is the Company’s largest shareholder and its willingness to enter into the
Commitment Agreement to ensure that the the Rights Offer is fully subscribed for is an indication of
RVF’s support for the continued roll out of the Company’s food services offering. Shareholders will not
have the ability to apply for excess allocations. The proceeds of the Rights Offer will be used to settle
the term debts, including the R225 million of Notes, that are currently outstanding, the transaction costs
and the balance of the proceeds from the Rights Offer will be used to fund the continued roll out of
Domino’s and Starbucks Stores.
It is the opinion of the Board that this represents the most favourable debt reduction and expansion
funding options available to the Company in the current circumstances.
2. THE DEBT REDUCTION AND CAPITAL RAISE
The Company intends to implement the intended debt reduction and capital raising in accordance with a
three part process comprising the purchase of Notes from the current holders by RVF (the “Notes
Purchase”); the Rights Offer; and the settlement of Taste’s term debt from the proceeds of the Rights
Offer (“Debt Settlement”), (collectively, the “Transactions”). An outline of each part of the process is set
out below:
2.1 The Notes Purchase
RVF will purchase all of the Notes from the holders of those Notes.
2.2 The Rights Offer
Taste will raise R398 million through a fully committed Rights Offer at 90 cents per Rights Offer
share.
2.3 The Debt Settlement
The proceeds of the Rights Offer will be used to settle, inter alia, term debt (which is comprised
predominantly of the R225 million Notes that are currently outstanding), and the transactions’
costs. The remaining proceeds will be applied to the rollout of planned Starbucks and Domino’s
stores.
3. SHAREHOLDER APPROVALS
As Taste will be issuing more than 30% of its shares in issue at the rights offer record date, the
Company requires shareholder approval in terms of section 41(3) of the Companies Act. Furthermore,
following the issue of new Taste Shares in terms of the Rights Offer, the Company’s issued share
capital will be close to its maximum authorised share capital. Taste therefore requires an amendment to
its Memorandum of Incorporation in order to increase the authorised share capital of the Company.
Accordingly, Taste will be proposing the issue of the Rights Offer shares in terms of section 41(3) of the
Companies Act and the relevant amendments to the Memorandum of Incorporation, which require
approval by way of special resolutions (requiring at least a 75% majority of the votes cast in favour of
such resolution) of all shareholders present or represented by proxy at the general meeting.
4. CONDITIONS PRECEDENT
The Transactions are subject to, inter alia, the following conditions precedent:
4.1 approval from the South African competition authorities, to the extent they are required;
4.2 approval from the Financial Surveillance Department of the South African Reserve Bank;
4.3 the signature of the Commitment Agreement by RVF and Taste; and
4.4 shareholder approval of the resolutions discussed in paragraph 3 of this announcement.
The Rights Offer declaration announcement will follow the fulfilment of the conditions precedent.
5. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement released by the Company on 29 September
2017 and the subsequent renewal thereof released on 10 November 2017, wherein the Board advised
shareholders, inter alia, that Taste is evaluating alternatives to settle its debt which may have a material
effect on the price of the Company’s securities, and are hereby advised that further to the details
contained in this announcement, caution is no longer required to be exercised by shareholders of Taste
when dealing in the Company’s securities.
6. DISTRIBUTION OF CIRCULAR
Shareholders are hereby advised that the circular incorporating a notice to convene a general meeting
of shareholders (“General Meeting”) in order to consider and, if deemed fit, to pass, with or without
modification, the resolutions necessary to effect the Transactions, will be distributed on
16 November 2017.
The circular will also be made available on the Company’s website at: www.tasteholdings.co.za on
16 November 2017.
7. NOTICE OF GENERAL MEETING
Notice is hereby given that the General Meeting will be held at 8:00 on Friday, 15 December 2017, at
the registered office of Taste, 12 Gemini Street, Linbro Business Park, Sandton, to consider and, if
deemed fit, to pass with or without modification, the business stated in the notice of General Meeting,
which is contained in the circular.
The Board has determined that, in terms of section 62(3)(a), as read with section 59 of the Companies
Act, the record date for the purposes of determining which shareholders of the Company are entitled to
receive notice of the General Meeting is Friday, 10 November 2017 and only shareholders who are
registered in the securities register of the Company on Friday, 8 December 2017, will be entitled to
participate in and vote at the General Meeting. Accordingly, the last day to trade in Taste shares in
order to be recorded in the Register in order to be entitled to attend, participate in and vote at the
General Meeting is Tuesday, 5 December 2017.
Johannesburg
16 November 2017
Corporate Advisor and Sponsor
Merchantec Capital
Legal Advisor to Taste
PricewaterhouseCoopers Legal Proprietary Limited
Legal Advisor to RVF
Bowman Gilfillan Inc.
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