Johannesburg - Shoprite said it will take over the leases of some stores run by 45-year-old furniture retailer Ellerine, which is being forced to close down.
Ellerine went bankrupt in August after parent company African Bank Investments Ltd failed.
The administrators now winding down the operations, with more than 940 stores and 7 060 staff, have been unable to sell four of Ellerine’s six main brands.
Instead they’re in talks with two unidentified South African retailers, with one of them prepared to take over leases on 210 stores and the other negotiating for 217 leases.
“We have already taken some that they closed -- Shoprite has taken about 10 so far,” Aubrey Karp, the Johannesburg-based managing director of Shoprite’s furniture unit, said by text message yesterday.
Brothers Sidney and Eric Ellerine started the furniture company in Johannesburg in 1969 and it grew to be among the country’s biggest retailers.
African Bank, which bought Ellerine in 2008 to boost its lending operations, loaned too much money to people who couldn’t afford to pay it back and the lender collapsed in August as losses mounted.
Ellerine’s funding was cut and administrators stepped in to salvage some stores for creditors.
Shoprite will lease further space “if this becomes available through the landlords or even through Ellerine,” Karp said, without confirming whether his company is one of the two retailers prepared to take over more than 200 Ellerine stores.
“We will also look at all opportunities that arise.”
Smaller Towns
Shoprite rose 0.8 percent to 168.31 rand, its highest intraday level in more than five months, as of 11:49 am in Johannesburg trading.
The retailer said in April it plans to double its number of furniture stores over the next decade as it identifies new markets away from major urban centers.
Many of Ellerine’s stores are in smaller South African towns such as Fochville in Gauteng province, Hluhluwe in KwaZulu-Natal and Kakamas in the Northern Cape.
Handing over the leases will mitigate the damage for landlords and provide jobs for some Ellerine employees, Les Matuson, one of the company’s administrators, said in an interview in Johannesburg on November 10.
Lewis Grou is buying the Beares brand from Ellerine, valued at 90 million rand for 63 stores, while Coricraft has said it will purchase Dial a Bed, valued at 200 million rand.
South Africa’s antitrust authority today recommended the Lewis deal be approved.
No staff may be fired as a result of the Lewis acquisition and it must offer job opportunities to the employees made redundant by Ellerine at the Beares shops, the Competition Commission said in an e-mailed statement.
Lewis is in a position to save at least 393 jobs, it said.
Lewis climbed 2.7 percent to 66.79 rand in Johannesburg. - Bloomberg News