Investing from the Cape to Cairo - December 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 you may remember from our last column, renewable energy deal activity was significant between mid-September and October. Once again, similar deal opportunities retained their popularity with Africa-focused private equity investors in the weeks running up to the end of the year. They were several in number and they straddled the full breadth of the spectrum of deal values.

In early December, Apis Partners announced it had led an investor consortium backing Greenlight Planet, one of Africa’s leading providers of pay-as-you-go off-grid solar energy financing solutions, in a $60 million equity and debt transaction. Eight Roads Ventures and Bamboo Capital Partners, who’d both backed Greenlight previously, provided additional capital towards the equity portion of the round while a mix of banks, development finance institutions provided the debt. The company will use the capital to support its growth plans for Africa, particularly in Kenya, Uganda, Tanzania and Nigeria, as well as to strengthen its capital structure and invest in its technology-enabled platform.

In another pay-as-you-go off-grid solar energy deal, Investec Asset Management made a follow-on growth equity investment in Mobisol in late November. The South African private equity investor first backed the Berlin-headquartered company in October 2016. The deal brings the total amount of capital raised by Greenlight in the last six months to $25 million, which will be used to fuel its expansion plans. So far, the company has already established itself in the Tanzanian, Rwandan and Kenyan markets where it has installed more than 100,000 systems providing an estimated 500,000 people with affordable, reliable and clean energy.

BPE Partners participated in a larger renewable energy deal in late October. The Cairo-based private equity manager made its first renewable energy investment in Egypt, participating in a $190 million debt/equity transaction to develop three solar power plants for the Benban Solar Park near Aswan. Once complete, the plants will have a generation capacity of 130MW will be part of the Benban Solar Park, soon to be the world's largest solar generation facility. Two development finance institutions, the IFC and European Bank for Reconstruction and Development, are also participating in the investment, the exact terms of which were not disclosed.

Larger still is the creation of Anergi Holdings, a diversified electricity platform company created by Africa Finance Corporation and Harith General Partners through the merger of some of both companies' renewable and non-renewable power generation assets. The new holding company owns equity interests in seven of assets which have a combined generation capacity of 1,786MW (gross) and 554MW (net) across five African countries. The new consolidated energy business will focus on acquiring, owning and managing controlling interests in other African electricity sector assets.

The final piece of renewable energy sector-related news involved an exit. Metier, the South African private equity firm, has exited its stake in AE AMD in a sale to African Infrastructure Investment Managers and Katiso Renewable Energy. Metier originally backed the renewable energy developer in 2013, and the sale of their 14.2% holding marks a full exit for Metier’s Lereko Metier Sustainable Capital fund. While terms of the deal were not disclosed, the sale returned the fund a healthy IRR in excess of 25%.

In other exit news, there was a significant trade sale in late November. Mitsui & Co. agreed to take a minority stake in ETG, an agricultural-commodity supply chain manager in Africa. The $265 million deal sees the Japanese trading and investment house acquire secondary shares from ETG’s founders as well as the Pembani Remgro Infrastructure Fund and Standard Chartered Private Equity, handing the latter a full exit from its stake. Standard Chartered Private Equity originally invested in the company in 2012 as part of a reported $210 million club deal with The Carlyle Group and Pembani Remgro. Carlyle had already sold its stake back to the firm’s founders and management team in 2015 for an undisclosed sum, which leaves Pembani Remgro as the only one of the private equity trio that remains invested in the company.

Earlier in November, Capitalworks and Mineworkers Investment Company agreed to sell their stakes in asphalt producer Much Asphalt to AECI, a listed South African explosives and chemical company. The agreed price of R2.272 billion or approximately $160 million is about 7x the company’s EBITDA. The two private equity firms and the company’s management team acquired Much Asphalt from Murray & Roberts in 2013, with Capitalworks holding a 66% stake in the company, MIC owning a 25.4% stake and the management team owned the balance of 8.6%.

Switching to fundraising news, a couple of funds held significant interim closes in the last few weeks of the year. Of the two, the largest was for Maghreb Private Equity IV, an AfricInvest-managed fund which held a first close of $165 million. Ultimately, the fund is aiming to raise up to $295 million to invest in small and medium sized businesses in North Africa, particularly those that are well-established in their local markets and which show the potential to scale their activities to a regional level.

Meanwhile Mediterrania Capital Partners announced that it had landed more than 40% of its fundraising goal for its latest fund, Mediterrania Capital III or MC III. The €103 million or approximately $123 million came from a group of development finance institutions, pension funds, funds-of-funds and family offices. Three quarters of the LPs making commitments had backed Mediterrania’s earlier funds. Adopting a similar strategy to AfricInvest, the planned €250 million (approximately $300 million) fund will be used to make growth capital investments in regional expansion-minded firms in North Africa and a select few countries south of the Sahara.

Many thanks for reading this and other earlier columns. We hope you find the, to be informative and useful. To see all deal and fundraising content, please be sure to visit http://africacapitaldigest.com If there are other subjects you'd like us to cover, please let us know. We value feedback from readers on how to improve the usefulness of the information for you.