Ellies’s power play flops, forces electronics group into business rescue

Ellies, a leading South African wholesaler, importer and distributor of electronic products and solar solutions, has entered voluntary business rescue. The announcement sent the group’s share price into freefall — it was down by 80% by 10am this morning.

In a brief announcement on Wednesday, the group said that its proposed purchase of Magetz Electrical and Power on Wheels — known collectively as Bundu Power — had failed to meet banking approval and that the deal had therefore fallen through.

First announced on 1 February 2023, Ellies expected to pay R207.6-million for Bundu Power and planned a R120-million rights issue, which it later cancelled on 4 December.

Bundu Power, founded in 2005, specialises in the distribution, rental and installation of alternative energy solutions for residential, commercial, industrial, hospitality, agricultural and recreational users.

On 4 December, Ellies provided an update on the proposed acquisition and withdrew its cautionary announcement.

Ellies had tried to reposition itself as a smart infrastructure business offering alternative energy, water storage and harvesting, connectivity and  smart home technology solutions.

Bundu Power’s acquisition was viewed as the first building block of its new strategy, which would build on the Ellies portfolio of alternative energy solutions. Ellies would also provide Bundu Power with a greater distribution network in southern Africa and access to a group with a level 1 BBBEE status.

At the time, Ellies proposed making five interim payments of R1-million each to be made to the five Bundu Power owners, in proportion to their shareholding in the company, an initial payment of R150-million to be paid on the date that the conditions precedent were fulfilled, and two payments of R26.3-million, to be settled within 60 days of 29 February 2024 and 28 February 2025 respectively, being the financial year ends of Bundu Power.

The proposed deal was dependent on debt funding. Ellies said on Wednesday that its bankers have advised that they will not fund the proposed transaction.

On 14 December 2022, Ellies reported its H2 losses had increased by 74.3% to R35.2-million (rising sharply from R20.2-million in the first half of the year).

On 1 August 2023, it announced a spectacular increase in losses: down by 95.9% and bleeding a further R85.4-million (F2022: loss of R43.6 million), for the year ended 30 April 2023.

In terms of the JSE Listings Requirements, Ellies’s interim results for the six months ended 31 October 2023 were required to be released within three months of the period end but the company is still finalising its results so their release will be delayed.

Due to the above disclosures, the board of directors of Ellies resolved that it would be in the best interest of the group to commence with voluntary business rescue proceedings. DM