SOUTH AFRICA – Imvula Education Empowerment Fund Trust has concluded its first investment in a Johannesburg Stock Exchange-listed company through its BroadBased Black Economic Empowerment (B-BBEE) agreement with Ellies Holdings.
The transaction will see Imvula invest R18.5 million (US$1.3 million) of its capital to acquire more than 185 million ordinary Ellies shares at 10 cents a share, representing a 23 percent stake in the company.
Additionally, unlike other B-BBEE agreements, Imvula’s share purchase did not attract any discount to the prevailing market price at the time of closing the deal, it includes a 10-year lock-in, and is paid for in cash.
The deal would result in a material improvement in Ellies’ empowerment credentials to a Level 4 B-BBEE status and the ability to fund expansion programmes in line with its strategy through the capital injection.
Imvula would benefit from the potential returns on its equity investment and partner with Ellies on socio-economic development programmes in communities where Imvula was active.
Imvula was founded in 2009 by Dr Taddy Blecher as a B-BBEE development trust to support the youth beneficiaries of the Maharishi Invincibility Institute (MI).
MI aims to provide talented but historically disadvantaged black youth with access to quality tertiary vocational education and a holistic structure to support their education and developmental needs.
This was provided through access to quality education, self-development, industry qualifications, nutritional support, mentorship, work experience and job placement with Accenture, Absa, Bryte and Manpower. Since its inception, the programme has placed more than 19,000 people.
Imvula and its trusts have equity agreements with 23 entities, including Fleishman Hillard, Manpower Group SA, Bryte South Africa, Nahana Group, Experian-Compuscan, Opentext and Instinctif Partners South Africa.
In February of 2021, Ellies Holdings decided to liquidate its embattled manufacturing segment, Ellies Industries, with 148 jobs lost in another blow to South Africa’s shrinking manufacturing sector, as it continues to turn around the group’s fortunes.
“The transaction will see Imvula invest US$1.3 million of its capital to acquire more than 185 million ordinary Ellies shares at 10 cents a share, representing a 23 percent stake in the company”
Ellies said the major lines produced by Industries, and which are largely sold to Electronics, consist of products related to satellite connectivity and associated electrical products, which Electronics is now in a position to procure externally at a lower cost than if manufactured by Industries.
Shaun Prithivirajh, the chief executive of Ellies, said in an interview that “It had been a very painful decision which affected 148 jobs. However, they could no longer carry the loss-making unit.
This came as the South African manufacturer, importer, wholesaler and distributor of lighting, electrical and solar products sunk deep into the red during the year ended April 2020 as losses widened by 709 percent.
The group’s total comprehensive loss was R196.1million (US$13.4 million), 538 percent higher than the R30.7m (US$2.1 million) loss a year earlier.
Ellies said that major contributions to the loss were a R97.7m (US$6.7 million) decline in revenue between March and April 2021 due to the national lockdown imposed to contain the spread of Covid-19 in South Africa, with associated gross profit falling R26.4m (US$1.8 million).
The group impaired goodwill of R51.4m (US$3.5 million), incurred R20.6m (US$1.4 million) in restructuring costs as a result of the migration of the Joburg warehouse to a third-party logistics supplier, including retrenchment costs of R18.3m (US$1.3 million).
Ellies also wrote off R49m (US$3.4 million) in obsolete inventory, impaired R12.3m (US$843,332) in investment properties as well as a write-off of previously recognised deferred tax assets of R16.3m (US$1.1 million).