South Africa's biggest mass-market lender, Abil, has made a firm offer to buy furniture retailer Ellerines in a 10.6 billion rand ($1.46 billion) all-share deal, the groups said on Wednesday.
African Bank Investments Limited (Abil) said the transaction is based on a valuation of 85 rand per Ellerines share and it will offer 265 of its own shares for every 100 Ellerines shares.
But if a planned black economic empowerment deal at Ellerines is taken into consideration, shareholders will receive 255 Abil shares for every 100 Ellerines shares, a deal value of 10.2 billion rand.
Shares in Ellerines opened over 3 percent weaker on Wednesday, before recovering to rise 1.44 percent to 76.99 rand at 0729 GMT. Abil was 0.75 percent weaker at 31.76 rand.
The opening fall was a mistrade. Now you will see the share (Ellerines) ticking higher, a Johannesburg-based trader said.
Abil said to maintain the current level of black ownership in the group, Abil said it will reserve 3.75 percent of the purchase price to be used to fund a black economic empowerment (BEE) program at Ellerines.
Most South African companies have implemented BEE programs, in line with the government's huge affirmative action program aimed at giving black South Africans a bigger slice of the economy after years of exclusion under apartheid.
The offer represented a premium of 47 percent on Ellerines' closing share price on August 17, the last trading day before the companies first announced they were in talks. Excluding the 3.75 percent reserved for the BEE transaction, the premium was 41 percent.
Abil and Ellerines have held discussions with a number of their respective major shareholders, who have indicated strong support for the offer, the companies said in a statement.