Taste to liquidate its Domino's Pizza business
This is after talks with prospective buyers collapse.
South Africa’s Taste Holdings said it was in the process of placing its food business into voluntary liquidation after a failed attempt to offload its Domino’s Pizza business.
It couldn’t find a buyer for the Domino’s Pizza business.
A deal could not be concluded on terms acceptable to the parties during talks with several parties, and Domino’s Pizza International is not providing additional financial support, the group said on Monday.
Following the liquidation of Taste’s food businesses - Taste Food Franchising Proprietary, Taste Commissary Proprietary and Taste Food Trading 1 Proprietary Ltd - the company will have to fully impair the remaining intercompany loans, with the units valued at about R450 million.
Taste’s move to liquidate the business comes after South Africa entered its second recession in two years in the final quarter of last year.
The company, which has been facing poor retail sales, in November said it would sell its Starbucks and Domino’s Pizza franchises in South Africa, retreating from a food industry that has been hit hard by the sluggish local economy.
Taste said in November it was unable to expand its network of chains sufficiently to reach its profit targets and intends to sell its fast-foods businesses. It has since sold its Starbucks licence as well as Maxi’s and The Fish & Chips Co.
Management had estimated that it required more than R700m, including the amount it had raised via a rights offer, to achieve a positive cash flow, and had to expand the Starbucks network to 150-200 outlets and Domino’s to 220-280.
The closure of Domino's affects 770 employees, and 55 corporate stores have been closed immediately, Taste said. Franchisees for the 16 franchised outlets will continue trading, with management providing advice and assistance where possible, Taste said.
“Taste has received no communication as to the date of cancellation of the franchising licence. The group retains the regional franchising licence until further notice,” the statement read.