By Philippa Larkin
JOHANNESBURG - Building materials retailer Cashbuild on Tuesday said it would purchase Pepkor's division, The Building Company Proprietary (TBC), along with the shareholder loan claims of Pepkor against TBC for R1.07 billion as it widens its geographical footprint.
TBC is a Southern African building materials retail and wholesale business with a portfolio of 13 well-known brands across its three divisions, including Buco, Timbercity, Cachet and MacNeil chains, Bildware and Tiletoria.
Cashbuild said its management had identified geographic expansion and incremental access to additional segments of the market as key areas for potential growth.
"An acquisition of TBC allows Cashbuild an opportunity to drive these growth initiatives while still maintaining its commitment to its customers in the South African and neighbouring markets, Cashbuild said.
TBC’s presence, inclusive of franchise stores, is predominantly based in South Africa (171
stores) with a further presence in the rest of Southern Africa including Namibia (7 stores), Botswana (two stores) and Zambia (one store).
The deal would also increased retail store footprint presence in Cashbuild’s previously under-represented regions, particularly those in the Western Cape, Eastern Cape and KwaZulu-Natal, Cashbuild said while also giving it a broader reach into the middle-to-higher income customer segment, a target market underserved by Cashbuild’s current offering.
It would also allow it an incremental competency in accessing and servicing the building contractors segment of the market as well as improve operational efficiencies and future trading profitability through access to additional suppliers, inventory and the optimisation of delivery routes.
In the financial year ending September, 30, 2019, the retail division contributed 68 percent of total TBC revenue across its stores. Over the same year, the wholesale division contributed 21 percent to total TBC revenue, and the specialised division contributed the balance of 11 percent of TBC revenue.
Shareholder loan claims due by TBC to the Pepkor related entities amounted to R2.93 billion, R2.8bn and R2.7bn as at the financial interim period endingMarch, 31, 2020, and the financial years ended September, 30, 2019 and September, 30, 2018, respectively, Cashbuild said.
Meanwhile, Pepkor said the deal would enable it to streamline its portfolio of businesses and focus on its core business of discount and value retail.
"Following a prolonged period of corporate activity that included various acquisitions, TBC has done well to restructure and consolidate the business. It has made significant progress in defining its value proposition, establishing a strong corporate culture, clarifying strategy and prioritising a central procurement strategy," Pepkor said.
BUSINESS REPORT