Ellies agrees to acquire Bundu Power for R203m

Ellies has made its first acquisition in 15 years, a move that the financially burdened electronics company hopes will mark a new chapter as it seeks to capitalise on opportunities in renewable energy and backup power.

The company said on Wednesday it has agreed to take full control of Bundu Power in a R202.6m deal. CFO Guy Moretti said the funding is likely to be a combination of debt and a rights issue.

The group’s last acquisition was the R180m deal for power generation and distribution equipment supplier Megatron Federal in 2008.

“This is the start of a journey for the new Ellies. While we have managed the costs in the older Ellies business, this acquisition is absolutely critical to put us on a new path,” CEO Shaun Prithivirajh told Business Day.

Ellies, which imports, manufacturers and sells electronic equipment such as aerials and power trolleys, has struggled to remain profitable in recent years as consumers cancel their cable and satellite television subscriptions in favour of online video streaming.

In response, it is branching into alternative power, selling solar power equipment and generators as SA buckles under persistent load-shedding.

Founded in 2005, Bundu Power specialises in distributing and leasing generators along with the distribution and installation of solar and related products for residential, commercial, industrial, hospitality, agricultural and recreational users.

The deal will expand Ellies’ portfolio of alternative energy products and will give Bundu an expanded Southern African distribution network “and access to a group with a level 2 BBBEE status”.

LIQUIDITY SQUEEZE

While demand for alternative power products are abundant in SA, a lack of liquidity has kept Ellies from fully capitalising on the opportunities.

“The continued and increased load-shedding, while negatively affecting the economy and the consumer, has benefited the group, with an increased demand for the alternative energy products that Ellies distributes, which has helped offset some of the decline in general demand from consumers, especially in the retail space,” the company said in a note at the end of 2022.

“Regrettably, Ellies could not take full advantage of this opportunity due to working capital constraints.”

To remedy the situation, the company recently struck a deal with lenders that will increase its ability to have stock on hand to meet demand from loadshedding.

Financial information for the year ended February 2022 shows that Bundu had net assets of R48.7m and made a profit of R11.2m after tax. Net income for the current year is estimated at R20.4m.