The country’s biggest microlender, African Bank Investments Limited (Abil), disclosed on Monday that it had submitted a letter to the board of directors of furniture group Ellerines expressing an interest to acquire the company.
It said that the Ellerines board was supportive of the strategic rationale and believed there was merit in progressing with the transaction.
“Accordingly, both Ellerines and Abil have permitted due diligence investigations to commence on each other,” Abil said.
Abil plans to offer R85 per share for Ellerines, equating to a purchase consideration of about R9,85-billion.
Abil intends to settle the purchase consideration by way of an issue of new Abil ordinary shares.
Based on the 30-day volume weighted average price of Abil, as at close of business on August 17 this year, of R32,10, the purchase consideration translates into an exchange ratio of 265 Abil ordinary shares per 100 Ellerines ordinary shares.
“In order to maintain the current level of BEE [black economic empowerment] ownership in Abil, after the new issue of shares, Abil is proposing to reserve 3,75% of the purchase consideration (BEE reserved shares).
“These shares are to be used to facilitate a BEE programme (similar to Abil’s Eyomhlaba programme) targeted at the Ellerines business, its preferred BEE partners and its other stakeholders, which will be implemented shortly after the conclusion of the transaction.
“Accordingly, after deducting the BEE reserved shares, Ellerines shareholders would receive a net purchase consideration of 255 Abil ordinary shares per 100 Ellerines ordinary shares,” Abil said.
The bank said the newly implemented National Credit Act will result in greater competition, a wider variety of choice and utility, and generally a lower cost of credit to consumers, which in turn will grow the size of the market.
“It is Abil’s intention to continue to grow its business to significant scale so that it can further lower the cost of credit to its clients and accelerate the innovation of new credit products and risk underwriting models to be a frontrunner in the changing landscape of the credit markets.”
The bank believes that the credit furniture retail market offers attractive growth opportunities, and that Ellerines offers a strong strategic fit to pursue these strategies. — I-Net Bridge