Investing from the Cape to Cairo
Africa Capital Digest’s Editor & Publisher, Allan Cunningham, provides his monthly summary of the deals and activity that’s helping to drive fundraising across the continent.
The prize for Africa's most active private equity investor in the late May and June timeframe must surely go to XSML Capital, the Dutch investment fund focused on SME opportunities in the Central and Eastern regions of the continent. By our calculation, they notched up a fund closing and two deals and with $50 million in hand following the final close of the African Rivers Fund, (STORY LINK: http://africacapitaldigest.com/xsml-holds-50mln-final-close-for-african-rivers-fund/) the firm's investment teams look set to continue to be busy sourcing and closing deals.
One of the reported deals was XSML's first in Uganda, which saw the firm making an investment in KARE Distribution, a business which helps locally manufactured brands to sell detergent, soap, vegetable cooking oil and water to low-income households. (STORY LINK: http://africacapitaldigest.com/xsml-invests-in-ugandas-kare/) Some of the capital will be used to open a new supermarket in a populous neighborhood in Kampala. Two weeks later, in mid-June, XSML pulled out their cheque book again and backed Maison Galaxy, a retail chain based in Kinshasa. (STORY LINK: http://africacapitaldigest.com/xsml-backs-maison-galaxy-in-undisclosed-deal/) In both instances, deal terms were not disclosed, but the firm's investment sweet spot is typically debt, equity or mezzanine deals ranging from $100,000 to $5 million in size.
It wasn't until the second half of June that we began to see deals that were larger in size. Mediterrania Capital Partners bought an 18% stake in MedTech, a systems integration company based in Morocco. (STORY LINK: http://africacapitaldigest.com/mediterrania-capital-takes-18-stake-in-medtech/) The firm, whose stated ambition is to become one of the leading fintech businesses on the continent, has been on the acquisition trail itself over the last three years, buying several businesses to help broaden its offering of value-added services. The fresh capital will be used to fuel MedTech's ongoing expansion plans.
The fintech sector featured prominently in South Africa too. In the first instance, Rand Merchant Investment Holdings and Nedbank Private Equity each took minority stakes in fintech business Entersekt in what was termed "a multi-million dollar deal." (STORY LINK: http://africacapitaldigest.com/rmi-and-nedbank-back-entersekt-in-multi-million-dollar-deal/) Stellenbosch-based Entersekt, which has developed push-based authentications and app security technology, plans to use the capital to support its international expansion plans.
Meanwhile, venture capital investor Capital Eye has established a new platform called Crossfin Technology Holdings with the backing of Multiply Group, a Durban-based investment firm. The new entity will house its current and future fintech investments. (STORY LINK: http://africacapitaldigest.com/capital-eye-assets-to-anchor-new-fintech-platform/), The initial group of Capital Eye portfolio companies that will make up Crossfin are Alacrity, Innervation, Emerge Mobile, the wiGroup and Blue Garnet. How much Multiply's 35% stake is worth was kept under wraps.
LeapFrog Investments made its biggest investment to date at the end of June, backing Enterprise Group, a Ghanaian financial services group, with $180 million. (STORY LINK: http://africacapitaldigest.com/leapfrogs-180mln-enterprise-group-deal-its-largest-to-date/) The deal's the first transaction to be made via LeapFrog Strategic African Investments, the private equity investor’s $350 million fund which is anchored by Prudential Financial. For the deal, Sanlam Emerging Markets is selling its stake in three of Enterprise’s subsidiaries for $130 million, while an additional $50 million is being earmarked to fund growth plans. With demand for financial services products in Ghana expected to expand significantly, Enterprise, which already has a 28% market share, seems well-positioned to benefit.
EuroMena III, a Capital Trust-managed private equity fund announced that it was acquiring a minority stake in one of Morocco's larger retailers. (STORY LINK: http://africacapitaldigest.com/euromena-iii-takes-minority-stake-in-moroccos-retail-holdings/) The business, Retail Holdings, has several franchise relationships with leading global brands and recently made its first acquisition foray south of the Sahara, taking control of Compagnie de distribution de Cote d’Ivoire, one of the West African country’s largest food distributors.
In the infrastructure investment space, African Infrastructure Investment Managers or AIIM agreed to take a 44% equity stake in Albatross Energy Mali. (STORY LINK: http://africacapitaldigest.com/aiim-takes-44-stake-in-125-5mln-albatross-energy-mali-deal/) The €125.5 million financing package is structured as 70% senior debt with the balance as equity. The size of AIIM’s stake means that the infrastructure investment specialist is now Albatross Energy’s largest shareholder. The deal’s other equity investors include Redox Power Solutions, Burmeister & Wain Scandinavian Contractor, (who will construct and operate the project), and Denmark’s Investment Fund for Developing Countries.
As the end of the second quarter hove into view, the pace of fundraising announcements picked up. There were a couple of interesting ones. Old Mutual is launching a $300 million agrifund which will look to buy up farmland, agribusinesses, agricultural infrastructure and agricultural technology companies outside South Africa. (STORY LINK: http://africacapitaldigest.com/old-mutual-launches-300mln-african-agrifund/) Old Mutual's anchoring the fund itself with $50 million and expects to close the fund in the next 3 years. In the same sector, but at a smaller scale, Sahel Capital held a $66 million final close for the Fund for Agriculture Finance or FAFIN, its West Africa-focused fund. (STORY LINK: http://africacapitaldigest.com/sahel-rakes-in-almost-66mln-for-fafins-final-close/) its expected that FAFIN will invest in up to 10 companies over the next 2 years, creating about 4,000 direct and indirect jobs and positively impacting the lives of some 36,000 smallholder farming families.
But the laurels for the biggest fund close rest with Adenia Partners, who held the final close for their fourth fund, hitting its hard cap of $257 million in an oversubscribed fund raise. (STORY LINK: http://africacapitaldigest.com/adenia-iv-hits-257mln-hard-cap-at-final-close/) The size of the fund dwarfs Adenia’s prior funds and is more than double the size of Adenia III, a €96 million vehicle which was launched in 2012. A little over 70% of commitments were made by investors in Adenia’s prior funds, all of whom increased the size of their allocations. Some 25% of the commitments were made by several LPs new to the firm.
Finally, Atlas Mara, the widely-followed banking platform co-founded by former Barclays' CEO Bob Diamond, welcomed a major new backer to its investor fold. Fairfax Africa, an investment subsidiary of Canadian life insurer Fairfax Financial, agreed to invest a minimum of $130 million in the firm, making them the biggest single shareholder owning 35% of the company. (Story Link: http://africacapitaldigest.com/fairfax-africa-takes-a-35-stake-in-atlas-mara/)
