Fast-food group has taste for jewellery

ALTX-listed fast-food franchiser Taste Holdings has announced it is moving beyond just having interests in the food services sector and was set to acquire jewellery chain NWJ Holdings for R120m.

CEO Carlo Gonzaga said the acquisition formed part of the company's strategy to be a consumer brand holding company. Taste (TAS), which owns the Scooters Pizza and Maxi brands, was never meant to be confined to foods.

The final price depended on NWJ's results for the year to April, the group said. The jewellery chain would be purchased through a combination of shares, cash, debt and equity funding.

Taste said it would issue shares for between R12m and R13,5m to fund the deal, and NWJ had accepted 10% of the purchase price in shares.

When the deal becomes effective on August 1, it will take combined sales of the new group to more than R650m for the 2009 financial year and the number of outlets to more than 240.

In the year to February last year, Taste reported revenue of R29,5m and attributable earnings of R8,4m, with headline earnings per share of 6,6c.

Gonzaga said the group listed in 2006 with the aim of building capacity to buy other companies. At a holdings company level, Taste fulfilled a strategic role rather than being hands-on with the business.

“We are not asking the Scooters Pizza and Maxi's franchisees to run a jewellery business.”

He said the group would continue to buy out other companies where such deals fitted into its strategy and Taste could add value.

NWJ, which operates in the value-for-money (middle) segment of the market, is the fourth-largest jewellery company in SA by number of outlets. The market leader, with just less than 200 stores, is American Swiss, followed by Sterns and then Galaxy.

Gonzaga said most of the chain's 70 outlets, which are mostly franchised, were in Gauteng and KwaZulu-Natal. He saw growth potential in Gauteng and Western Cape.

The slowdown in consumer spending was not expected to dent the company's performance severely. While all retailers were feeling the brunt of higher interest rates and the credit crunch, NWJ was benefiting from being value- focused and from consumers trading down, he said.

NWJ founder and MD Hylton Rabinowitz will join the Taste board once the transaction is effective.

Source: Business Day

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