Last week in brief…August 8th, 2016
The big dollar stories in Africa’s private equity world last week concerned not investments but rather changes in structure and strategy. Three European institutions who have been active investors in the continent’s financial services sector for many years announced that they were pooling their existing African assets to create Arise, $660 million investment platform. Slated to launch in January 2017 once the necessary approvals have been won, the new platform will look to make minority investments in additional companies, expanding the firm’s asset base to $1 billion. FMO, Norfund and Rabobank are the institutions behind Arise, owning stakes in financial services companies in more than 20 countries. It’s expected that Portugal’s Banco Montepio will also join the partnership in the near future.
As reported a couple of weeks ago, Ethos Capital, a special investment vehicle set up by Ethos Private Equity was planning to list on the Johannesburg Stock Exchange. That happened on Friday last week, following an oversubscribed private placement which raised R1.8 billion or approximately $131 million.
Ethos Capital will act as a seed fund for the other funds managed by Ethos Private Equity, making primary investments in new funds, acquiring the interests of current Limited Partners in existing funds as well as making co-investments alongside the funds. The listing provides retail investors with the opportunity to participate in the returns offered by the private equity asset class, which in Ethos’s case have delivered a gross realized IRR of 37.4% over the private equity fund manager’s 32-year history.
Deal activity remained on the light side last week. Sahel Capital is investing an undisclosed amount in a deal for Dayntee Farms, a commercial poultry farm located in Nigeria’s Kwara State. The deal is being transacted by the Fund for Agricultural Finance in Nigeria or FAFIN, an agribusiness-focused private equity fund which counts a number of Africa-focused institutions and the Nigerian Government among its sponsors. As part of the deal, Sahel Capital’s Olumide Lawson and Olaniyi Oladejo will join Dayntee Farm’s board of directors.
The fresh capital has been earmarked to fund the expansion of the company’s production capacity and tap the growing demand for protein from the West African country’s consumer. The transaction marks the third deal for the fund, which us targeting a $55 million final close. Within the past 18 months, FAFIN has invested in two agribusinesses in Nigeria–L&Z Integrated Farms, an integrated dairy, and Diamond Pearls Agro Allied, a producer of edible oils.
Investisseurs & Partenaires announced three deals last week for its Afrique Entrepreneur fund, a €54 million vehicle that is now in its last year of investment. The private equity impact investment firm partnered with French development institutionProparco to invest $2.2 million in Enko Education, the private school network founded by Cyrille Nkontchou and Eric Pignot. The capital will be used to both fund the operations of its existing schools as well as execute the launch of Enko Education’s planned new schools in 2016 and 2017.
Currently, the company has three schools in its portfolio, located in Cameroon, Mozambique and South Africa. Enko Education plans to have opened an additional thirty schools within the next 5 years, primarily in francophone and southern Africa.
I&P’s other two deals of the week involve companies who also have pan-African expansion ambitions. Barajii produces and commercializes water and locally produced fruit juices packed in bio-degradable bags and PET bottles. While most of the production currently takes place in Burkina Faso, Barajii aims to develop its production and distribution activities in 8 to 10 countries over the next 5 years. And Africa Radio, which is currently under development, plans to be an independent African radio station, developing a suite of news, music and sports programs led by a team of Africa journalists. No terms for either of the two latter deals were disclosed.
In investment company news, Private Equity International reports that mezzanine debt fund manager Syntaxis Capital is setting its sights on the African opportunity. The firm is targeting opportunities presented by the funding gap created by the reluctance of local banks to work with small and medium-sized businesses. Syntaxis’s Africa initiative will be led by a three-person team, initially investing on a deal-by-deal basis.
A couple of perspective pieces caught our eye last week – in the first, Old Mutual Alternative Investments chief Paul Boynton discusses why Africa should retain its attraction for private equity investors despite some of the macroeconomic headwinds buffeting the asset class currently. And in the second, Paul Schroder and Ryan Gawrich of law firm King & Wood Mallesons provide a commentary on the current deal market for mining assets in Africa today where an upswing in M&A activity predicted by some has yet to materialize. While the immediate outlook perhaps remains subdued, they see “a number of bright spots and once in a generation opportunities for those with an eye to the medium and long term.”
As always, you can review these and other stories by clicking through to this week’s complete issue of Africa Capital Digest.