Ellerines and African Bank

Description

Ellerines and African Bank: Abstract

At the end of the third quarter of 2007, Leon Kirkinis, chief executive officer (CEO) of African Bank Investments Limited (ABIL), unexpectedly arrived at the head office of Ellerine Holdings Limited (EHL), a South African furniture retail group, with a proposal to purchase EHL. For some time, EHL, which derived a substantial portion of its profit from loans provided to customers wishing to buy furniture, had been looking to enter into a deal with a bank as a means of growing its business. Up until the ABIL offer, EHL had been seriously considering a joint venture with Capitec Bank. Now, EHL’s CEO, Peter Squires, and the EHL board had to decide which route to choose.

Part B: In August 2014, seven years after Ellerine Holdings Limited (EHL) had been purchased by African Bank Investments Limited (ABIL), the board of EHL announced that EHL and Ellerine Furnishers (Pty) Ltd (EF) had applied for voluntary business rescue. The new EHL chief executive officer, Mano Moodley, and his board wondered if their decision to partner with ABIL had been too hasty. If they had chosen an alternative partner, would the outcome have been different? This Part B case should be used in conjunction with Part A.

Multi-part case

• Part A: Suitable Suitors?
• Part B: A Toxic Acquisition Recipe

Teaching objectives

The primary teaching objective of this case is to understand the principals of mutually beneficial mergers and acquisitions. The case allows students to identify the elements that result in a successful merger/acquisition; and to determine the factors that the management of the companies need to consider in the aftermath of the merger/acquisition.