After working through and discussing this case, learners should be able to:1. evaluate the financial condition of Ellerine Holdings Limited (EHL) at the time of the merger proposal and use it to make inferences about the company’s ability, at that time, to function effectively as a going concern;2. identify the conditions within EHL and in the operating environment that may have made it necessary for EHL to seek to change its business strategy;3. determine whether the acquisition price offered to EHL by African Bank Investments Limited (ABIL) was fair; and4. compute the value accretion/loss expected to be realised by the existing shareholders of ABIL and EHL under the merger proposal.
This case situates the directors of Ellerine Holdings, a furniture retail company that merged with African Bank Limited in 2007, reflecting on the events that led up to both entities being placed into business rescue in 2014 and asking whether the merger was the cause of the demise. If they had chosen an alternative partner, would the results have been different?
Masters Level students – MBA or Masters in Finance.
For instructors.The following material has been provided with the teaching note for instructors:- Teaching Note.- Johannesburg Stock Exchange News System (SENS) extract of related original filing.For students.The following supplementary material has been provided to accompany the case:- Financial information on the two companies (Excel spreadsheet).- Johannesburg SENS extract of related original filing.
CSS 1: Accounting and Finance.
