Wrap Text
Disposal of the Starbucks Franchise Business and Cautionary Announcement
TASTE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2000/002239/06)
Share code: TAS
ISIN: ZAE000081162
(“Taste” or “the Company”)
DISPOSAL OF THE STARBUCKS FRANCHISE BUSINESS AND CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
1.1. Shareholders are referred to the Company’s SENS announcement earlier today
regarding the change of strategic direction of the Company and are advised that on 31
October 2019, the Company, through its wholly-owned subsidiary Taste Food
Franchising Proprietary Limited (“Taste Food”), entered into an agreement
(“Agreement”) with K2019548958 (South Africa) Proprietary Limited (“Purchaser”), in
terms of which the Company will dispose of its Starbucks franchise business in South
Africa (“Starbucks Business”) as a going concern to the Purchaser, for an aggregate
disposal consideration of R7 000 000 (“Disposal Consideration”) (“Disposal”).
1.2. The Starbucks Business comprises 13 corporate-owned Starbucks stores situated in
Johannesburg, Pretoria and Durban.
2. RATIONALE FOR THE DISPOSAL
As stated in the abovementioned SENS announcement, the Company has, following
detailed operational reviews and canvassing potential partners and capital providers,
reached the conclusion that Taste should change its strategic direction and exit the food
business given that it has become evident that capital investment required for the previous
expansion strategy cannot be secured, given the current structure of the business and
existing market conditions. In line with the Company’s change in strategic direction, Taste
Food has entered into the Agreement to dispose of the Starbucks Business.
3. DISPOSAL CONSIDERATION
The Disposal Consideration includes VAT at the rate of zero percent, and shall be paid
by the Purchaser to Taste Food on the closing date, being the third business day following
the date on which the last of the Conditions Precedent (as defined below) to the Disposal
is fulfilled or waived, as the case may be (“Closing Date”).
4. APPLICATION OF THE DISPOSAL CONSIDERATION
The Disposal Consideration will be used towards meeting the Taste group’s working
capital requirements and its liabilities (as they fall due).
5. CONDITIONS PRECEDENT
5.1. The Disposal is subject to the fulfilment of the following outstanding conditions
precedent (“Conditions Precedent”):
5.1.1. the conclusion of a schedule detailing disclosures made by Taste Food against the
warranties provided by Taste Food in terms of the Agreement, in a form acceptable
to the Purchaser, by 7 November 2019;
5.1.2. approval by the boards of directors of Taste Food and the Company, respectively, of
the Agreement, the Disposal and all other agreements and transactions set out
therein, by 7 November 2019;
5.1.3. the Purchaser completing a due diligence investigation of the Starbucks Business to
its satisfaction, by 21 November 2019;
5.1.4. the Purchaser or its relevant affiliate entering into a funding agreement, pursuant to
which the Purchaser or its affiliate, as the case may be, makes a loan facility available
to the Company in an amount of up to R9 000 000, of which R7 000 000 shall be
repayable on the Closing Date with the remaining amount being repayable on or
before 24 months after the Closing Date;
5.1.5. the novation of the existing master franchise agreement with Starbucks EMEA Ltd (a
British corporation with its principal office in the United Kingdom), by the conclusion
of a new franchise agreement between Starbucks EMEA Ltd and the relevant
Purchaser group company, together with accompanying guarantees, support
undertakings and release of undertakings;
5.1.6. the novation of certain of the lease agreements relating to the Starbucks Business
to and in favour of the Purchaser and the amendment of such lease agreements,
including the replacement of the existing security provided or procured by Taste Food
in respect of such leases with security provided or procured by the Purchaser, on
terms acceptable to the Purchaser.
5.1.7. exchange control approval being obtained, to the extent required, for the
implementation of the transactions contemplated in the Agreement on such
conditions and terms (if any) as are acceptable to the Purchaser;
5.1.8. the Purchaser being registered for VAT;
5.1.9. no suit, action or proceeding having been commenced by any person seeking to
restrict, restrain, prohibit or otherwise challenge the sale and purchase of the
Starbucks Business as contemplated in the Agreement;
5.1.10. Taste Food and the Purchaser determining and agreeing the value of the leave pay,
potential severance pay and any other payments in each case accrued to the
transferred employees as at the Closing Date, by not later than 10 November 2019;
5.1.11. all third-party consents being obtained to the assignment of the benefit of the
contracts applicable to the Starbucks Business;
5.1.12. Taste Food and the Purchaser determining and agreeing the value of the leave pay,
potential severance pay and any other payments in each case accrued to the
employees transferred to the Purchaser in accordance with the Disposal as at the
Closing Date, by not later than 10 November 2019;
5.1.13. Taste Food and the Purchaser agreeing a schedule of fixed assets, movable assets,
stock, cash-in-hand, details of staff and employees, and fixtures held, located at
and/or rendering services in relation to the Starbucks Business and at each relevant
Starbucks store location, by not later than 14 November 2019;
5.1.14. the Company obtaining a fairness opinion by an independent expert, acceptable to
the JSE, confirming that the terms of the Disposal are fair as far as the shareholders
of the Company are concerned (“Fairness Opinion”), by 21 November 2019; and
5.1.15. the parties agreeing each of the following –
5.1.15.1. the relevant trade creditors to be transferred to the Purchaser together with the
Starbucks Business;
5.1.15.2. a list of certain existing agreements relating to the Starbucks Business;
5.1.15.3. a list of the employees transferring as part of the sale of the Starbucks Business
(identifying certain employees in respect of whom a separation agreement will be
entered into with Taste Food pursuant to which (i) the services of such employees
are to be terminated on an amicable basis at the cost of Taste Food, or (ii) such
employees will be redeployed within the Taste group).
5.2. Save where indicated otherwise in paragraph 5.1 above, the Conditions Precedent must
be fulfilled by not later than 13 December 2019. If the Conditions Precedent are not
fulfilled and/or waived, as the case may be, by the relevant date for fulfilment and/or
waiver, as the case may be, the Agreement shall lapse and be of no further force or
effect.
6. EFFECTIVE DATE OF THE DISPOSAL
Delivery of the Starbucks Business and payment of the Initial Amount will take place on
the Closing Date, being the effective date of the Disposal. It is currently anticipated that
the Closing Date will occur on or about 2 December 2019.
7. FINANCIAL INFORMATION
The financial effects of the Disposal will be published in due course.
8. WARRANTIES AND OTHER SIGNIFICANT TERMS OF THE AGREEMENT
8.1. The Agreement contains representations, warranties and indemnities by the Company
in favour of the Purchaser which are standard for a transaction of this nature.
8.2. The Purchaser shall be entitled to terminate the Agreement by delivering written notice
to such effect to Taste Food if, in the opinion of the Purchaser, a change occurs, prior
to the Closing Date, which will or is likely to have a material adverse effect on the
condition (financial or otherwise) of the Starbucks Business or on the rights or remedies
of the Purchaser under the Agreement. If the Purchaser terminates the Agreement as
aforesaid, Taste Food will not have any claim against the Purchaser under the
Agreement, save for any claim arising from a breach prior to such expiry.
9. CLASSIFICATION OF THE DISPOSAL
9.1. Rand Group Limited, which is a member of the consortium of shareholders of the
Purchaser, is owned and controlled by Adrian Maizey, a non-executive director of Taste,
and is accordingly a related party to Taste.
9.2. The value of the Disposal is greater than 0.25% but less than 5% of the Company’s
current market capitalisation (excluding treasury shares). Accordingly, the Disposal will
constitute a small related party transaction, which requires the appointment of an
independent expert to compile the Fairness Opinion on the Disposal in terms of
paragraph 10.7(b) of the JSE Limited Listings Requirements, to confirm that the
Disposal is fair as far as the shareholders of the Company are concerned.
9.3. The directors of the Company will appoint an independent expert to compile the
abovementioned Fairness Opinion. The independent expert will consider the terms and
conditions of the Disposal and confirm whether it is of the opinion that they are fair to
the shareholders of the Company.
9.4. A further announcement will be released on SENS once the Fairness Opinion has been
finalised.
10. CAUTIONARY ANNOUNCEMENT
Shareholders are advised to exercise caution when dealing in the Company’s securities
until a further announcement regarding the Fairness Opinion and the financial effects of
the Disposal has been made.
Johannesburg
1 November 2019
Corporate Advisor and Sponsor Legal Advisor
PSG Capital Cliffe Dekker Hofmeyr
Date: 01/11/2019 07:57:00
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.
Sharenet Sites 
