The Competition Tribunal has approved African Bank Investments' (Abil's) buyout of Ellerine Holdings unconditionally, paving the way for the furniture retailer to delist on January 22.
African Bank offered in September to acquire Ellerines for R9,85bn in a deal that the retailer's board said showed “strategic rationale”. The new entity will have almost 2000 outlets, more than 2-million active clients and a gross debtors' book of about R16bn.
Chris Gilmour, an analyst with Absa Asset Management Private Clients, said the deal set a precedent in the furniture industry because Ellerines would be the first company to separate its financial services division from its retail function. Rival retailer JD Group was following this path, but was restructuring internally after failing to entice a banking partner.
Ellerines had expected to be delisted from the JSE by the end of the year. However, an administrative delay at the Competition Commission pushed this out to next month.
Ellerines CEO Peter Squires said previously that the deal should bolster sales volume, as the new structure would let it focus on selling, with the bank handling financial services.
Abil said previously it intended growing its business to lower the cost of credit significantly.
Executive director David Woollam said the bank would retain the retail aspect.
The marriage between the two companies was expected to enable Ellerines to move on its strategy of expanding its range of credit offerings as well as stemming the loss of retail credit customers. It would also give the company a platform from which to “address the growing burden of regulatory compliance”.
The furniture retailer said Abil's expertise in “credit risk optimisation and its highly effective analytics expertise” would boost Ellerines' ability to offer credit to its customer base. The deal was also expected to make Ellerines more competitive as it could cut the cost of capital.
Ellerines has said that one of its strategies is to expand its financial services arm.
The company spent 30 months exploring “numerous possibilities in this regard” before signing a deal with African Bank. Its vision is to create a “powerful consumer finance organisation, capable of offering a wide range of consumer finance, insurance and banking products”.
Article via I-Net-Bridge
