Integration of the Ellerines financial services business into by gyvwpsjkko


									Integration of the Ellerines
financial services business
into African Bank

                   August 2010

• ABIL acquired Ellerines Holdings Ltd in 2008

• Integration of Ellerines’ financial services activities into African Bank is key to
  achieving ABIL’s strategic objectives

• Substantial progress has been made so far in preparing for the integration –
    Ellerines’ SA stores have been transferred onto African Bank’s credit origination platform
    Collections and call centre activities of the two entities have been combined
    A single, central credit risk management function has been created
• One aspect remaining - to transfer Ellerines’ existing loan book to African Bank
Acquisitions details

• African Bank will acquire the financial services business of Ellerines which comprises:

      A net advances book (after related impairment provisions) of approximately R3,0 billion

      A related deferred tax asset of R0,3 billion

      The right to grant credit in all Ellerines’ South African stores and goodwill relating to the
        financial services business of R4,0 billion

• The transaction price will be approximately R7,3 billion

• No impact on the earnings and balance sheet at an ABIL group level for 2010

• The transaction is expected to be effective 7 September 2010
Settlement details

• The acquisition will be settled in the following manner:

      A cash settlement of approximately R1,1 billion will enable Ellerines to settle third party

      Set-off of R0,5 billion of inter-company funding

      A loan account claim of R5,7 billion, which Ellerines will distribute back to ABIL as a
        dividend in specie via Ellerines Holdings Ltd

• ABIL will write down the investment in Ellerines by R5,7 billion and utilise the dividend to
   subscribe for new ordinary shares in African Bank
Transaction process

                                                                     Ellerine Holdings
                                   ABIL                              distributes loan
                                                                     account to ABIL as
                                                                     dividend in specie
           ABIL uses dividend to
           subscribe for
           additional shares in
           African Bank

 African                                    Holdings           Ellerine Furnishers
  Bank                                                         distributes loan account
                                                               to Ellerine Holdings


                                          Ellerine Furnishers
                                          uses cash to settle
                                          loans with third parties
Effect on subsidiaries

• The bank acquires a net advances book of approximately R3,0 billion, increasing total net
   advances to R22,0 billion

• The bank issues additional shares to the value of R5,7 billion to ABIL

• Of the new share capital, approximately R1,7 billion will be unimpaired capital for both
   regulatory and internal capital model purposes

• The capital injection increases African Bank’s capital adequacy ratio, on a pro forma
   basis, from 24,6% to 33,9%

• Capital in Ellerines is reduced by R5,7 billion

• Ellerines’ remaining business will be that of a cash retailer

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