Shareholders in Cashbuild have approved proposals that will pave the way for the building material retailer to sell a 10% stake in the company to its employee base of approximately 2,000 people across South Africa, of whom more than 90% qualify as historically disadvantaged South Africans (HDSAs).
In an announcement following the shareholder vote on Monday, Cashbuild said its shareholders had approved measures including: an increase of the loan to the Cashbuild Empowerment Trust; a specific issue of shares for cash; and amendments to the Cashbuild Empowerment Trust.
As a result, the company will now be able to go ahead with its black economic empowerment (BEE) scheme, which was the very first to be announced in South Africa's retail sector in November 2004.
In terms of the structure of the transaction, Cashbuild will establish the Cashbuild Empowerment Trust, which will be funded by Cashbuild Management Services (CMS), a wholly owned subsidiary of Cashbuild. The Trust will subscribe for 2.58 million new Cashbuild shares at a price of 29.09 rand each, representing a 10% overall stake in the company. The non-interest bearing loan from CMS to the Trust to acquire the new shares will total 75.067 million rand.
The Trust will be overseen by five trustees, three elected by company employees (including the Cashbuild chairman) and two appointed by Cashbuild as professional advisors.
Each employee will obtain a vested right in the net dividends received by the Trust, and the Trust would distribute any dividends received (after the deduction of any administration costs). The distribution would be made equally to all employees who were employees at the date of distribution of the relevant dividend.
Describing its reasoning behind the transaction in November, Cashbuild said it wished to "embrace empowerment" and believed that it was aligning the interests of employees and shareholders.
This would enable Cashbuild to remain competitive and to preserve its leadership position as the largest retailer of building materials in Southern Africa.
