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Weekly Wrap, July 25th, 2016; Ethos, Duet, Stellar make private capital news last week

Last week in brief…July 25th, 2016

There were a number of significant Africa-focused private capital deals and fund launches. The largest, in dollar terms, sees pan-African private equity investor Duet Group teaming up with Asset Management Corporation of Nigeria or AMCON to launch a $400 million fund focused on turnaround and distressed opportunities in Nigeria’s fast moving consumer goods sector. The fund’s portfolio will consist exclusively of locally-branded food and beverage companies and as part of the deal, AMCON is contributing 6 portfolio companies which are currently under its control to the fund.

In other fundraising news, Ethos Private Equity, one of the largest sub-Saharan fund managers, is looking to raise R2 billion (about $139 million) by listing Ethos Capital, a special vehicle, on the Johannesburg Stock Exchange. 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 IPO, which is expected on August 5th, has reportedly already garnered R1.1 billion in commitments from a number of blue-chip investors including New York private equity firm Black Hawk,Coronation Fund Managers, Kagiso Asset Management, Stanlib as well as Ethos Private Equity itself.

In deal news, Stellar Capital Partners, the investment company which acquired troubled South African financial services group Cadiz Management in 2015, is looking to make a strategic equity investment in Prescient Holdings, the company that houses Prescient’s financial services interests. The transaction, which is worth R1.43 billion (approximately $100 million) would reportedly give Stellar a 40% to 49% stake in Prescient Holdings, the newly formed private venture holding the financial services assets. Prescient Holdings management shareholders will reinvest to hold a 40% stake in the new venture.

Africa-focused private equity firm Development Partners International (DPI) is investing about $35 million in B.TECH. The investment is being made by African Development Partners II, the $725 million fund which closed some 45% ahead of target in April last year. The deal gives DPI a 33.3% stake in Egypt’s largest home appliances and electronics retailer which operates 67 retail stores across the country. According to DPI, B.TECH has expanded its revenues at an annualized rate of 18% growth rate over the last 5 years. The capital will be used to support the company’s growth strategy through the development of new products and services, opening of new stores and implementation of  improvements in the company’s supply chain and IT infrastructure.

It was reported last week that Jacobs Capital, a South African private equity firm, has acquired Gelvenor Textiles in January in an undisclosed deal. The manufacturer of industrial, technical, outdoor lifestyle, protective and aeronautical fabrics was sold byCourthiel Holdings, which is owned by German corporate investor Claas Daun. The transaction includes a merger with South Coast based MB Workwear, one of South Africa’s leading manufacturers of workwear and personal protective clothing. MB Workwear becomes a division of  Gelvenor Consolidated Fabrics.

IFC is spending a total of $22 million to buy a 4% stake in ADvTECH, a South African private education provider. The investment is made up of two deals—1.6% was acquired in the market, whilst 2.5% of the stake will be in newly issued shares. The investment will support JSE-listed ADvTECH’s plans to expand into new African markets. The open-market share purchase is particularly notable since the IFC normally invests in publicly-listed through the issuance of new shares. The deal makes the IFC the fifth largest shareholder in AdvTECH behind Visio Capital, Coronation Fund Managers, Old Mutual and the Public Investment Corporation.

Silvertree Capital, the investment arm of Silvertree Internet Holdings, is backing online pet food and accessory retailer Pet Heaven in an undisclosed expansion capital deal. The fresh capital will be used to boost the company’s marketing efforts, offer a broader range of products, improve its technology platform and recruit additional team members to build market share across South Africa.

South Africa’s Competition Commission has given the go ahead for Old Mutual to merge the assets and management of two real estate investment vehicles. Under the terms of the deal, the Old Mutual Alternative Investments-managed Housing Impact Fund South Africa or HIFSA will acquire the 50% of Mettle Property Solutions Securitization it does not already own to take full control of the special purpose vehicle which it established in 2011.

The East Africa Venture Capital Association has published a case study compendiumof some of the private equity deals in the region. In all, seven deals across a wide range of sectors are profiled including Chai Bora, Chims, Family Milk, Garden City, Haltons Pharmacy and SolarNow. The compendium takes a look at the ways in which their private equity investors have added value and helped them push growth and increase value.

Saying in East Africa, How we made it in Africa has an interesting article on private equity in the region. AfricInvest‘s George Odo gives his perspective the asset class’s ongoing evolution and his experiences of some of the key factors facing those investors looking for opportunities in the region.

And finally, as the fortunes of Africa’s banks founder on the weakening performance of their loan books, The Economist takes a look at the current challenges facing the industry on the back of low commodity prices and ineffective regulation.

As always, you can review these and other stories by clicking through to this week’s complete issue of Africa Capital Digest.

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