Abil’s talk of Ellerines sale likely to put bank in play

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The news that African Bank Investments Limited (Abil) was discussing a sale of its furniture retail business was no surprise, retail analysts said yesterday, but the big question was who would buy it.

Speculation was rife after Abil advised shareholders it was in talks to dispose of Ellerine Holdings and its divisions.

Abil’s share price shot up 17.38 percent to close at R7.90.

Media reports have said that Old Mutual wants to buy Abil.

Sources in the retail sector said the furniture group could fit well with Shoprite’s OK Furniture. An analyst who did not want to be named said Christo Wiese, with a controlling stake in Shoprite, was always looking out for retail investments.

Other fingers pointed to Steinhoff as potential buyer, but retail analyst Chris Gilmour at Absa Investment was quick to say that Steinhoff could battle to get round the Competition Commission. “The concentration of power in one retailer could be frowned upon by… authorities,” he said.

Steinhoff already plays in the local furniture retail space through JD Group, which owns Bradlows, Russels and Morkels.

Gilmour said Ellerines could be sold in parts to private equity companies.

“Nothing changes in terms of having a new suitor for Abil because at the end of the day they would have to find a buyer for Ellerines,” he said, adding that Ellerines could be sold as a furniture group separate from its financial services unit.

Ron Klipin of Cratos Wealth was interested to see who would buy Ellerines given the slide in spending on durable goods. “Anyone looking at buying Abil is looking to buy a clean business with banking as the only component,” he said.

Klipin said a lot of work had been done to fix the lending book which would include more stringent risk criteria. Despite Abil’s recent recapitalisation, it might need a further top-up.

“However, a sale of Ellerines should substantially help the financial position of Abil.” He added that a partner with deep pockets could be a saviour, providing credibility, cheaper funding and the right guidance.

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