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CASHBUILD LIMITED - INTRODUCTION OF BROAD-BASED BLACK ECONOMIC EMPOWERMENT IN
CASHBUILD (`THE TRANSACTION`)
Cashbuild Limited
(Incorporated in the Republic of South Africa)
(Registration number 1986/001503/06)
Share code: CSB ISIN: ZAE000028320
(`Cashbuild` or `the company`)
INTRODUCTION OF BROAD-BASED BLACK ECONOMIC EMPOWERMENT IN CASHBUILD (`THE
TRANSACTION`)
1. Introduction
Cashbuild wishes to introduce a broad-based empowerment shareholder in line with
the principles enshrined in the Broad-Based Black Economic Empowerment Act.
Cashbuild will achieve this by introducing its employee base of approximately
2000 employees, of which more than 90% qualify as Historically Disadvantaged
South Africans (`HDSA`) as the broad-based black economic empowerment
shareholder.
2. Rationale for the transaction
Cashbuild wishes to embrace empowerment and believes that by embarking on the
proposed transaction it is aligning the interests of employees and shareholders.
This will enable Cashbuild to remain competitive and to preserve its leadership
position as the largest retailer of building materials in Southern Africa.
3. Key terms of the transaction
The transaction will be effected through the establishment of the Cashbuild
Empowerment Trust (`the Trust`) that will be funded by Cashbuild Management
Services (Proprietary) Limited (`CMS`), a wholly-owned subsidiary of Cashbuild.
CMS will advance up to R70 million to the Trust in order for the Trust to
acquire up to 10% of the existing issued shares in Cashbuild. The loan to the
Trust shall be non-interest bearing and should the Trust be terminated the loan
will be repaid to CMS.
There shall be up to five trustees in the Trust. The company`s employees shall
always elect three trustees and Cashbuild, at its election, shall be entitled to
appoint two trustees as professional advisors, provided that these appointees
are not full time employees of the company. The chairman shall be one of the
employee elected trustees.
Each employee shall obtain a vested right in the net dividends received by the
Trust. A distribution of the dividends received by the Trust (after the
deduction of any administration costs of the Trust in respect of the relevant
distribution period) shall be made when dividends are received by the trust. The
distribution shall be made equally to all employees who were employees at the
date of distribution of the relevant dividend.
Upon the occurrence of the following events:
* a change of control in the company following a successful takeover of the
company; or
* final liquidation of the Company, whether voluntary or compulsory; or
* a disposal of the whole of the company`s business or a substantial part of its
assets as contemplated in section 228 of the Companies Act; or
* termination of the Trust for any reason
the trustees will dispose of the Trust`s shareholding in Cashbuild. The proceeds
received will first be applied to repay the outstanding loan to CMS and the net
capital remaining will be distributed to employees.
Participants have a right to acquire their pro-rata shares out of the Trust at
any time at the average price at which the scheme shares are traded on the JSE
Securities Exchange SA for the five trading days immediately preceding the date
upon which the offer is made by the participants.
The Trust will be reviewed after five years and every three years thereafter to
ensure that it meets the relevant industry charter and company`s requirements.
Any amendment to the Trust Deed will be subject to company, trustees and
shareholder approval.
4. Conditions precedent
The adoption of the transaction remains subject to approval by the Cashbuild
shareholders at the annual general meeting to be held on Monday, 6 December 2004
at Cashbuild`s registered offices.
5. Financial effects
The tables below set out the pro-forma financial effects, on a consolidated and
not consolidated basis, of the transaction on the earnings per share (`EPS`),
headline earnings per share (`HEPS`), net tangible asset value per share
(`NTAV`) and net asset value per share (`NAV`) of the Company based on the
audited financial results for the year ended 30 June 2004. This pro-forma
financial information has been prepared for illustrative purposes only and
because of its nature may not give a true picture of Cashbuild`s financial
position and results of operations, nor the effect or impact of the transaction
going forward. The preparation of the pro-forma financial information is the
responsibility of the directors and in the opinion of PricewaterhouseCoopers
Inc. the adjustments are appropriate for the purposes of the unaudited financial
effects in terms of Section 8.30 of the JSE Listings Requirements.
Consolidated
Before After Percentage
the the increase/
transaction transaction (decrease)
(cents)(1) (cents)(4)
EPS 248.3 248.6(2) 0.1
HEPS 251.4 252.0(2) 0.2
NAV 725.0 485.3(3) (33.1)
NTAV 688.1 440.8(3) (35.9)
Notes
(1) Extracted from the published financial results for the year ended 30 June
2004.
(2) Based on the assumption that the transaction was implemented on 1 July 2003
and that 100% of the Cashbuild shares forming part of the scheme shares were
purchased in the market at an average price of R30 per share.
(3) Based on the assumption that the transaction was implemented on 30 June
2004.
(4) The foregone notional interest on the loan made to the trust is at an after
tax rate of 5.6%.
If the trust were not consolidated, the pro forma financial effects of the
transaction would appear as follows:
Not Consolidated
Before After Percentage
the the increase/
transaction transaction (decrease)
(cents)(1) (cents)(4)
EPS 248.3 230.1(2) (7.3)
HEPS 251.4 233.2(2) (7.2)
NAV 725.0 700.2(3) (3.4)
NTAV 688.1 663.5(3) (3.6)
1 Extracted from the published financial results for the year ended 30 June
2004.
2 Based on the assumption that the transaction was implemented on 1 July 2003
and that 100% of the Cashbuild shares forming part of the scheme shares were
purchased in the market at an average price of R30 per share.
3 Based on the assumption that the transaction was implemented on 30 June 2004.
4 The foregone notional interest on the loan made to the trust is at an after
tax rate of 5.6%.
Cashbuild`s auditors, PricewaterhouseCoopers Inc. have given their opinion that
the Trust shall be consolidated in Cashbuild`s group annual financial
statements.
6. Further details
A circular, giving further details, will be posted together with the annual
report, to shareholders on or about 12 November 2004.
7. Withdrawal of cautionary announcement
Shareholders are referred to the cautionary announcement dated 3 November 2004,
and are advised that caution is no longer required to be exercised by
shareholders when dealing in their securities.
Johannesburg
10 November 2004
Investment bank and sponsor
Nedbank Capital
Independent reporting accountants
PricewaterhouseCoopers Inc.
Corporate law advisers and consultants
Van der Heever & Associates
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