Competition blocker: Cashbuild gets red light on Pepkor’s The Building Company

Cashbuild’s proposed acquisition of Pepkor’s The Building Company (TBC) has fallen through with the Competition Commission recommending the transaction not take place due to the creation of a somewhat monopoly within the hardware and building material space in rural and township related areas. The Competition Commission have been rather busy over the last few months, with the regulator blocking Grand Parade Investment’s sale of fast food outlet Burger King to a private equity buyer, with the proposed foreign acquirers not having the necessary black economic empowerment credentials. Whilst both decisions from the Commission can be looked at and scrutinised from a number of different angles, in the case of The Building Company – the intentions seem rational from the regulator, which forms part of its primary purpose – to protect consumers. It seems for all money that Cashbuild have been the big losers here, with the hardware and building materials sector booming through Covid, which would have aided The Building Company’s performance over the last twelve months or so. Pepkor noted that they will consider future opportunities for The Building Company in order to unlock value for shareholders. – Justin Rowe-Roberts

Cashbuild SENS statement: 

Further update – Cashbuild’s acquisition of the building company 

Cashbuild shareholders are referred to the SENS announcements released by the Company on:

• 4 August 2020 where the Company announced that it had entered into a definitive sale and purchase agreement on 3 August 2020 with Pepkor Holdings Limited to acquire 100% of the issued share capital of The Building Company Proprietary Limited (the “Transaction”); and

• 28 May 2021 where shareholders were advised that the Competition Commission announced their recommendation that the Transaction be prohibited.

The approval of the Transaction by the Competition Commission was a material suspensive condition which was required to be fulfilled in order to implement the Transaction.

Consequently, given that not all the suspensive conditions would be met by the long stop date of 16 August 2021 and the parties are unable to agree on an extension to the long stop date, the Transaction is regrettably terminated.

Pepkor SENS statement: 

Update relating to the disposal of the building company proprietary limited (“TBC”)

Pepkor shareholders and noteholders are referred to the SENS announcement released on 31 May 2021 relating to the Competition Commission’s recommended prohibition of the Company’s disposal of 100% of the issued share capital of TBC to Cashbuild Limited (the “Transaction”).

The approval of the Transaction by the Competition Authorities remains a material outstanding suspensive condition which would not have been fulfilled by the Transaction long stop date of 16 August 2021 (“Long Stop Date”). As a result of Pepkor and Cashbuild not being able to reach agreement on an extension to the Long Stop Date, the parties have accordingly agreed to terminate the Transaction.

TBC has performed well and has made substantial progress to restructure and consolidate the business while improving its strategic alignment, performance and profitability.

While the disposal of TBC would have enabled Pepkor to streamline its portfolio of businesses in order to focus on its core business of discount and value retail, Pepkor believes this outcome to be in the best interest of value creation for Pepkor shareholders and noteholders. The group will consider future opportunities to unlock value as these may arise.

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