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Weekly Wrap, December 1st, 2014; Brait, Carlyle, DPI and more make private capital news last week

The week in brief…December 1st, 2014

Deal activity in Africa last week was brisker than it has been for a while.  By far the biggest news was Steinhoff Internationals $5.7 billion acquisition of South Africa’s largest retail clothing group, Pepkor.  The deal provides private equity investorBrait with a significant exit, earning them $2.4 billion in cash and shares for their stake. Brait’s CEO, John Gnodde, told Bloomberg that the firm would be looking to deploy the windfall in acquisitions in 12 to 18 months’ time.  This drew comment from some analysts who expect publicly-listed Brait’s shareholders to push them to deploy the replenished war chest rather more quickly than that.  We’ll watch to see how that plays out.

In other exit news, a consortium led by DPI sold Assur Africa Holdings, owners of a majority stake in Nigerian insurer Mansard, to the AXA Group for approximately $246 million.  Other investors in the exiting consortium include AfricInvest, DEG, FMO andPROPARCO. The transaction is expected to close before the year’s end.

It was also a week in which we saw a number of firsts from The Carlyle Group in Africa. Their first investment in Nigeria, their first investment in South Africa, the first deals for their $698 million sub-Saharan fund.  In their maiden deal in Nigeria, they invested $147 million through a rights issue to take an 18% stake in Lagos-based lender, Diamond Bank.  In their maiden South African deal, they teamed up with Old Mutual Private Equity to acquire Ethos Private Equity‘s stake in tyre retailer and wholesaler Tiger Automotive. Terms for this deal went unreported.  In both cases, the deals were the first to be made through Carlyle’s dedicated $698 million sub-Saharan fund which closed earlier this year. The fund’s next transaction could take place as soon as the first quarter of next year, when, according to Businessweek, they are reportedly looking to do another Nigerian deal in $50 million to $200 million range.

Egyptian snack maker Bisco Misr remained in the headlines as Abraaj Investment Management and Kellogg’s bid and counterbid each other to acquire the company.  If you remember, Abraaj had made an original offer of $118 million, only to see their bid bested by a $127 million offer from Kellogg’s, the U.S. cereal maker.  Early last week, Abraaj countered again, raising their offer to almost $128 million. We’ll have to see what happens next, although it seems to us that Abraaj may be in a stronger position having already won regulatory approval to make the acquisition.

On the debt investment front, Ethiopia becomes the latest sub-Saharan African country to tap the sovereign bond market to raise capital to finance domestic infrastructure projects.  The roadshow to raise a $1 billion ten-year bond kicks off this coming week.   Investors expect Ethiopia will have to pay a yield of between 6% and 7%.  Meanwhile in other credit market news, Cote D’Ivoire is looking to raise $302 million to finance projects and resolve its arrears with banks and insurance companies.  We’ll see if investor appetite for Africa’s bonds remains as healthy as it has been, despite the calls for restraint from some quarters.

Some interesting perspective on the challenges for infrastructure development in Africa were published this week. PwC has just released its outlook report on Capital Project and Infrastructure spending.  John Caywood, PwC Africa’s Capital Projects and Infrastructure Leader, recorded a brief video summarizing the main factors hampering development.  A link to the full report is also included.

You can take a look at these and the other stories of the week by clicking through to the full issue of Africa Capital Digest.

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