Southern African building materials retailer Cashbuild has reached an agreement with Pepkor Holdings, subject to conditions precedent, to acquire 100% of the issued share capital of its wholly-owned subsidiary The Building Company (TBC), as well as the shareholder loan claims of Pepkor against TBC, for a purchase consideration of R1.07-billion.

TBC is a Southern African building materials retail and wholesale business, providing a full spectrum service offering to the construction industry, including the residential, commercial and industrial markets, with a core competency in servicing building contractors.

TBC offers a portfolio of 13 well-known brands across its three divisions, namely: the retail division which houses notable brands including Buco and Timbercity; the wholesale division which includes Cachet and MacNeil chains, and the specialised division offering differentiated products across brands including Bildware and Tiletoria.

In addition to the core retail division, the wholesale and specialised divisions allow for differentiated access to a broader base of specialised products and materials.

TBC has a portfolio of store locations with an established presence across the coastal regions of South Africa, comprising 160 TBC outlets and 21 franchise stores.

The portfolio includes 91 Buco stores, 75% of which are merchant stores with the balance being cash stores, and 20 Timbercity stores.

The remainder of TBC’s store footprint largely covers both the wholesale and specialised divisions.

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 (seven stores), Botswana (two stores) and Zambia (one store).

“The transaction aligns with our strategy of expanding our geographical footprint, as well as giving Cashbuild incremental access to additional segments of the market as key areas for potential growth.

"The 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. We are delighted to be bringing on a highly experienced senior management team who are fully supportive of the transaction,” says Cashbuild CEO Werner de Jager.

He points out that the transaction not only increases the group's retail store footprint, but also enables Cashbuild to access the building contractors segment of the market.

Further, the transaction is expected to result in operational efficiencies and improved future trading profitability through access to additional suppliers, inventory and the optimisation of delivery routes.

“We are fully aware that over the course of the Covid-19-related nationwide lockdown, there have been significant disruptions to TBC’s trading.

"Lockdown regulations severely constrained trading during April and May, where the business was only permitted to trade on a very limited product range. The TBC business [has been] permitted to trade on its full product range since June in line with the reopening of the construction industry and has since seen a positive trajectory in trading momentum.

"We as a management team still believe that trading conditions will remain extremely challenging for the foreseeable future; however, the long-term benefits of the transaction are set to enhance stakeholder value,” De Jager says.