SOUTH AFRICA – Empowerment investment company Brimstone Investment Corporation clearly has no cravings for Starbucks and Dominos Pizza.
On Monday, Brimstone reported it had sold off its 15% stake in franchise specialist Taste Holdings, which holds the local rights for Starbucks and Domino’s Pizza.
Brimstone, which controls hake fishing group Sea Harvest, made its initial investment in Taste at the time of the acquisition of The Fish & Chips Co.
The move is surprising, since Taste was part of Brimstone’s food investments, a hub that accounts for the biggest chunk of value in the empowerment company.
Brimstone chairman Fred Robertson could not be reached for comment on Monday.
Speculation in the market was that Brimstone might have reconsidered the Taste investment after it became apparent it might take longer than expected to unlock value from big brands such as Starbucks and Domino’s.
The costs of rolling out these brands were apparent in Taste’s recently released results to end-February, which showed a major drop in earnings.
Brimstone does, though, have previous fast-food sector experience, having been invested in chicken eatery Nando’s in the late 1990s during its short tenure on the JSE. The value of Brimstone’s stake in Taste was about R150m.
It is unlikely Brimstone exited with a meaningful profit. Even though Brimstone bought 12.4% of Taste in 2012 at 154c per share, it has followed its rights in two capital raisings by Taste at a higher price.
Brimstone’s annual report showed that it had last year acquired a tranche of 19.7-million shares at an average of 302c a share — markedly higher than Monday’s closing price on the JSE of 255c.
This is the second small-cap investment that Brimstone, which has its biggest investments in Life Healthcare and fishing conglomerate Oceana, has sold in recent weeks.
In April, the firm sold off its stake in fashion retailer Rex Trueform and holding company African & Overseas Enterprises.