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Shares of Ellerine Holdings fell to a three-month low yesterday after the country’s second-largest furniture retail company said Poco International Holdings planned to sell its 20.2 percent stake in the firm.

May 25, 2007

By From Bloomberg

Johannesburg – Shares of Ellerine Holdings fell to a three-month low yesterday after the country’s second-largest furniture retail company said Poco International Holdings planned to sell its 20.2 percent stake in the firm.

Poco, a Brussels-based company that invests in household goods retailers, was selling 25.2 million shares through a global placing by Citigroup, Ellerine said after the market closed yesterday.

Poco has held shares in Ellerine since 2005, when the local retailer acquired rival Relyant Retail, of which Poco owned 41 percent.

“There are a lot of shares in the market that now need to be sold,” said Ian Troost, a fund manager at Metropolitan Asset Management in Cape Town. “These shares will usually be priced at a discount to the market price, so people sell the stock and buy it back later.”

Ellerine announced earlier this week that fiscal first-half profit rose 14 percent as sales climbed 9.6 percent to a record R4.4 billion. Domestic retail sales have surged for the past five years, spurred by interest rates near the lowest in two decades and rising black employment and wealth.

Four interest rate hikes last year curbed credit extension, slowing credit sales growth to 71 percent of total sales, the company said.

Ellerine’s share price was also being pressured by the introduction at the beginning of next month of the National Credit Act, said Troost.

The new law, which forces lenders to assess all the debt a potential client has, allows indebted consumers to ask a magistrate to temporarily freeze or cut payments and requires more transparent charges.

Ellerine stock fell 3.31 percent to close at R83.73, while the general retail sector declined 0.7 percent.