Investing from the Cape to Cairo Summer 2017
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.
As the evenings start to draw in and the leaves begin to turn in the northern hemisphere, it seems sensible to take a look back at the activity in Africa's private capital markets over the past three months. If you’re looking for a word to describe it, it would have to be varied. There were some big numbers flying around, certainly, but the pace of deal making at the SME end of the scale kept up its end of the bargain.
Of the deals that were done, one in particular had been the subject of ongoing speculation. In the end, The Abraaj Group beat out twelve or so bidders to win the year-long auction to buy Kenya's Java House, (LINK TO: http://africacapitaldigest.com/abraajs-java-house-deal-gives-ecp-full-exit/ ).
The July deal gave fellow private equity investor Emerging Capital Partners and the firm's founder Kevin Ashley full exits from the coffee chain. While financial terms of the deal were not disclosed, the Financial Times reported that Emerging Capital Partners was looking for bids in the $100 million range for the company. In the last 3 years, During the private equity firm's 3-year period of ownership, Java House expanded from having 13 outlets in Nairobi to having 60 outlets in 10 cities in Kenya, Rwanda and Uganda. Look for the pace of expansion of the company’s three brands—Java House, Planet Yogurt and 360 Degrees—to continue.
Another high-profile firm attracted headlines throughout the summer. Atlas Mara, the financial services investment platform that's the brainchild of former Barclays CEO Bob Diamond, was the subject of its own deal. In mid-July, the company's shareholders approved a deal to sell at least a 30% stake to Fairfax Africa, an investment subsidiary of Canadian life insurer, Fairfax Financial. (LINK TO: https://africacapitaldigest.com/atlas-maras-shareholders-give-fairfax-deal-the-nod/) Fairfax Africa expected to invest a minimum of $130 million in the deal, made up of a $100 million mandatory convertible bond and at least $30 million of the equity portion being offered. In the final event, Fairfax Africa spent approximately $59 million on the equity portion of the deal, mopping up more additional shares than anticipated which Atlas Mara’s existing shareholders declined to take up. Fairfax now owns 42.4% of the company, which has assets in seven sub-Saharan African countries.
In South Africa, another financial services platform sold off part of its assets in September. (LINK TO: https://africacapitaldigest.com/african-rainbow-capital-raises-r4-3bln-via-jse-listing/) African Rainbow Capital (ARC) successfully listed ARC Investments, its new investment entity, on the Johannesburg Stock Exchange raising about $330 million. The new entity was seeded with almost half of ARC’s financial services assets, including stakes in Alexander Forbes, Santa, and fledgling stock exchange A2X as well as all of ARC’s non-financial services interests.
Helios Investment Partners acquired Fertilizer and Inputs Holding from Louis Dreyfus Company, one of the world’s largest commodity traders. (LINK TO: https://africacapitaldigest.com/helios-buys-louis-dreyfus-co-s-african-fertilizer-business-in-200mln-deal/) According to The Financial Times, people familiar with the deal value the transaction at being around $200 million, split equally between debt and equity. The firm distributes fertilizers, crop protection products, seeds and industrial chemicals in several markets on the continent generating approximately $300 million in revenue annually. Helios plans to provide the firm with expansion capital to help accelerate the growth of the business and build “other country multi-distribution platforms” in the agricultural sector on the continent.
Other agribusiness deals were of a different scale entirely. And ranged across a broad spectrum of produce. Two in particular, spring to mind. LGC Capital, a Canadian investor, in partnership with AfriAg, a South African specialist agribusiness, agreed to acquire a 60% stake in House of Hemp in a deal valued at approximately $4.1 million. (LINK TO: https://africacapitaldigest.com/lgc-and-afriag-buy-60-stake-in-house-of-hemp/) The 50/50 joint venture wants to develop a fully-regulated cannabis growing and processing industry for export to certified and regulated end users world-wide.
Early September saw One Thousand & One Voices announce the third deal for its fund, buying San Lei, an aquaculture business located in the Kingdom of Lesotho in an undisclosed deal. (LINK TO: https://africacapitaldigest.com/1k1v-backs-lesotho-trout-farm-for-its-third-deal/) The private family capital fund’s new asset is a trout producer located on the shores of the Katse Dam in the land-locked country’s highlands. The company, which is the largest of its kind on the continent, produces and processes sushi-quality trout which is primarily sold in the South African and Japanese markets.
Finally, there was one private equity firm which had a particularly active summer. With $25 billion of capital available, its deals and have been both big and bold. In mid-July it backed Eco Medical Village with $300 millon to develop West Africa’s largest private hospital in Accra. The financing was made up of $100 million in equity and $200 million in debt. Later that month, it launched Milost Bank Africa, a new financial services company which will seek buyout opportunities in the banking industry on the continent. The company's strategy will be to execute complete buyouts of operating banks, particularly in the ECOWAS and SADC regions, and rebrand them using the MBAL name. And most recently, the Milost announced it is launching a $1 billion SME fund in partnership with investment holding company Monnaie Africa. Isilo, as the General Partnership will be known, will be domiciled in Mauritius, with Milost holding a 70% interest in the partnership.
Thanks for reading. As always, we’re very interested to hear your ideas about subjects to cover in this column every month, so please let us know. And of course, please tell us what you like or dislike about it. Helps our ongoing quest for improvement.
