Johannesburg - Before releasing annual results today, Taste Holdings warned shareholders of a legal threat to its South African master licence agreement with Domino’s Pizza.
Taste advised shareholders yesterday that “certain local aggrieved parties, who were unsuccessful in previous negotiations with Domino’s Pizza International, are objecting to the validity of Taste’s recently secured rights to Domino’s Pizza” as announced by the two companies on April 10.
The news pushed the company’s shares down by more than 3 percent to R3.73 by midday yesterday.
Last month, Taste, which owns Scooters Pizza, Zebro’s Chicken and Maxi’s among others, announced that it had entered into a 30-year master agreement with Domino’s Pizza.
What is believed to be a legal application has cited Domino’s Pizza as the main respondent and Taste Holdings as a second respondent.
Taste said it had received notification of the objection on Monday afternoon and legal merits of the objection were currently being investigated by both respondent companies.
Taste chief executive Carlo Gonzaga was quick to confirm yesterday that the aggrieved parties were not any of the listed food services companies.
He would only say it was three local businessmen.
He said the only reason Taste put out the announcement was because it was releasing its annual results this morning.
“It will not be good of me to stand in front of the shareholders, knowing that we’ve had a notice of this nature from Domino’s,” Gonzaga said.
He confirmed that none of the aggrieved parties had a written agreement with Domino’s Pizza.
“According to Domino’s there is no other agreement, however they were also investigating these allegations.”
Taste said the board of directors felt it prudent to inform shareholders of the objection and promised to update shareholders in due course.
When asked if this could have any cost implications or create some hurdles in getting the deal done, Gonzaga said he was not yet in a position to make any informed opinion.
The deal stipulates that Taste initially develops the Domino’s Pizza brand in seven southern African countries: South Africa, Lesotho, Swaziland, Namibia, Botswana, Zimbabwe and Mozambique. Zambia and Malawi will follow on the fulfilment of certain conditions.
Domino’s Pizza has more than 10 800 stores in about 70 countries, including the US, India, Mexico and South Korea.
Gonzaga had previously said the group’s pizza brands, including Scooters and St Elmo’s, would change name to Domino’s Pizza this year.
Taste indicated earlier this month that earnings a share and headline earnings a share were expected to rise between 17 percent and 23 percent.
The shares recovered ground in the afternoon, to close just 1.55 percent lower at R3.80.