The deal's in the detail.

Posted On Monday, 21 July 2003 02:00 Published by
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Fifty years of business expertise now brought to bear on investment portfolio and property.
By Ian Fife

Every Saturday morning the two Ellerine brothers, Eric and Sid, and Sid's son Kevin visit a shopping centre somewhere in SA. The minute they arrive, Eric goes to the washroom.

"The cleanliness of the toilets," he explains, "is a good indicator of how well the centre is managed." Then they have breakfast and tour the shops.

Depending on the outcome of Eric's visit and the collective assessment of the property, the Ellerine brothers and son may consider buying the shopping centre, mostly with listed property investment companies.

It is this savvy and attention to detail that has helped the Ellerine brothers build a private company with an investment portfolio worth as much as R5bn, including R1bn in property.

Kevin (35) heads Ellerine Bros' property business. Eric (69) looks after the company's listed investments and Sid (67) tends its growing private equity investments.

The company has become the first port of call for business people looking for investment partners. And it's not just the money. The brothers have added substantial value to their investments with the simple but astute hands-on approach they take to business controls and the immense experience they have from 51 years in business together.

The Ellerine brothers first ventured into business in 1950 when 16-year-old Eric started Ellerines, a furniture retail company, with £106 he had saved. Sid joined two years later, after he had turned 16. The two worked together to build one of the biggest furniture retailers, with more than 600 stores in SA and neighbouring countries.

Eric and Sid freed themselves four years ago from the furniture retail business to concentrate on Ellerine Bros.

"We know where to find the fat that can be cut out," says Eric. Stories are legion about their cost-cutting skills.

Take their investment in Canal Walk (see FM Focus July 11). In the months they were visiting Cape Town while negotiating to buy the property (with listed property loan stock company Hyprop), the brothers suggested converting some of Canal Walk's offices to temporary residential space so they could save on hotel costs.

But this is not meanness. "It's a state of mind that will make them a major contributor to Canal Walk's future success," says Corpcapital property dealmaker Marc Wainer, a long-time partner of theirs.

With impeccable timing, Ellerine Bros has been investing heavily in property for a few years. The portfolio started with 75 buildings housing the Ellerines furniture stores but has grown to 82, including 50% of Fourways Crossing in partnership with listed property unit trust Sycom, and a share in The Glen Centre, also with Hyprop.

"We're not big enough to buy these quality centres on our own, so we have to do them with listed partners," says Eric.

"We know retail property very well. Our expertise and Sidney's knowledge of every single nook of Southern Africa has been really invaluable," he told Business Times last year.

Eric also says the stock exchange is in for a major upswing: "I'm very confident about its future."

He has to be. The biggest chunk by far of Ellerine Bros' investment portfolio is in listed shares.

The company was one of the early and major backers of Bidvest, the logistics and services group founded by Brian Joffe in 1988 (see Cover Story).

"We look for individuals who eat, sleep and drink successful businesses but need some capital and financial controls," says Eric.

Besides Bidvest, the Ellerines have a shareholding in private hospital group Netcare. Other investments include furniture manufacturer Steinhoff, broadcasting and other media company Primedia, and furniture retail company JD Group.

Not all listed investments have been a success. Financial services and property company Corpcapital, of which Eric is chairman, is unwinding.

The brothers have used their private equity division to back management buy outs. These include the management-led acquisition and eventual delisting of tyre manufacturer Dunlop International. They also backed the management buy out in 2001 of laboratory and process analysis equipment supplier Swiss Lab.

Other investments include Prepaid, a company that does more than 80% of Telkom's prepaid business, and nine other businesses.

Financial Mail


Publisher: Financial Mail
Source: Financial Mail

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