In just a few days, Taste Holdings will know if its minority shareholders still have the stomach to digest the sour brand of news it seems to be routinely dishing out.

Famously, Taste has the exclusive licence in SA for two of the world’s biggest brands: coffee brand Starbucks and Domino’s Pizza. Only, it turns out, launching superstar brands in SA is ruinously expensive.

So once again Taste is asking its shareholders to bail it out — following several rights offers in recent years, which have raised R1.06bn.

At a meeting to be held on January 18, Taste will ask shareholders to provide it with R132m. It’ll represent major dilution for the shareholders, who have seen the value of their investment fall 95% in five years, as Taste will effectively double its share capital.

Chances are good that Taste will get the money. It has the backing of its major shareholder, the Riskowitz Value Fund (RVF), which already holds 66%. The fund, run by founder Sean Riskowitz, probably has no option at this point.

But despite RVF’s backing, it’s not a done deal yet. At the meeting, 75% of its shareholders need to agree to the offer. The other big shareholders are investment groups PSG Asset Management, Morgan Stanley, Royal Bank of Scotland, Deutsche Börse and Standard Bank, which collectively hold just under 9%.

Independent analyst Anthony Clark, a long-standing Taste critic, believes minority shareholders should vote against the resolution. Clark argues that it’s nothing less than a stealthy attempt by RVF to delist Taste.

He says if the rights offer is approved, it could easily push up RVF’s holding in Taste, which would allow it to delist Taste without the approval of its minority shareholders.

Not that the offer Taste is making to shareholders is appealing in any way. New shares are being issued at 10c a share, below the current level of 16c a share, and far lower than the 90c a share offer made a year ago to raise R398m. This will double its existing share capital to 4-billion shares in issue.

Taste’s silence hasn’t made things any better for the company. CEO Tyrone Moodley did not respond to the FM’s request to be interviewed on the impact of this rights offer.

AlphaWealth fund manager Keith McLachlan says there are not many options left for Taste. He estimates the group will need as much as R500m to turn itself around.

"At best, Taste has become a private equity play," he says.

Considering how much money investors have already put into Taste, McLachlan thinks they no longer have an appetite for the group, as there are more lucrative companies they can invest in.

Lawrence Barit, a private individual who is one of the group’s minority shareholders, says he has all but given up on it. At one stage he held about 1% of the group but after several rights issues, his holding has been diluted to 0.29%. "I’ve lost complete interest in the group," he says.

Barit, who holds about 2.58-million shares, stopped following the group after the previous rights issues. He says he didn’t even know about the latest rights offer and is not planning to follow it.

McLachlan says the problems at Taste, in part, stem from the departure of food division CEO Jay Currie in March 2016. Currie went to Taste in September 2013 with a stellar reputation after building up Massmart’s low-income food retailer, Cambridge Food.

In three years he expanded Cambridge Food from 22 stores making R2.5bn in sales in 2010 to 47 stores generating close to R9.4bn in sales. Before taking the Taste job, he was a shareholder in the group and had been on its board for almost 10 years.

By the time Currie left Taste, the contribution from its food division revenue had risen from R315.3m in 2013 to R492.1m in 2016. His departure came at a busy time, as Taste was rebranding its Scooters outlets to Domino’s and introducing Starbucks into SA.

Currie’s job was taken over by Taste CEO and founder Carlo Gonzaga. That’s where the problems began, says McLachlan.

Though Gonzaga is a great entrepreneur, he didn’t have the right skills to scale up the food business. McLachlan says that while Gonzaga made some good decisions (like buying jewellery chain NWJ in 2008 for R120m), he also made bad ones — like taking over from Currie himself, rather than bringing in someone else.

As a result, says McLachlan, the group tried to do too much. It lost its direction and began making chunky losses. It got worse when it couldn’t find a buyer (at the price it wanted) for its jewellery business, and had to get its shareholders to pay off its debt of R270m. Gonzaga quit as CEO in February 2018.

To Barit, the Taste story is simple: "It went from huge profits to huge losses."