AUREOS Africa Fund reaches $318 mln

Aureos Capital announced on 25 August that Aureos Africa Fund has increased its funds under management to US$317.8 million. The fund initially closed in September 2008 and is listed on the website (www.aureos.com) as having $253.5 million. It expects a final close by mid-December 2009.
Aureos Capital is a private equity fund manager investing in small to mid-sized businesses in emerging markets.
The Aureos Africa Fund invests across several sectors, countries and transaction types. It targets opportunities where Aureos sees potential for above- average growth via regional expansion. It makes initial investments of up to US$10 million in small to mid-size companies with a strong potential to expand to pan-African businesses within 2 to 3 years via “buy and build” strategies and/or through carefully executed organic growth.
The Fund has so far made 9 investments including in financial services; technology media telecommunications; fast-moving consumer goods; building products; real estate development and agri-business. The companies operate in more than 15 different countries, reflecting their regional expansion.
First investors were international finance institutions (IFIs) and US-based private sector investors. Recently European pension funds, family offices, commercial banks and European Development Finance Institutions have committed funds.
Sev Vettivetpillai, CEO of Aureos Advisers Ltd, said: “Despite the global economic slowdown, we are seeing continuous economic growth in Africa and foreign direct investment seems to be picking up providing a vibrant economic platform for building a well diversified portfolio of sustainable companies in the SME segment of the market. We were confident that the Aureos track record was of great interest to investors who had appetite for investing in Africa”
Davinder Sikand, Regional Managing Partner of Aureos Africa, adds that small and medium-sized businesses are key players in domestic demand and supply chains, which make them very well-placed to achieve critical mass and pursue regional growth strategies: “We are building an exciting investment portfolio across the African continent. This clearly demonstrates Aureos’ business model to partner with leading mid-market companies and to build sustainable first-rate regional businesses through both organic growth as well as M&A driven strategies.”
“We are beginning to develop relationships between portfolio companies at opposite ends of the continent – which we see as a first step towards building pan-continental businesses that will truly capitalise on the enormous opportunities on the ground in Africa today”.
Aureos’s successful track record of investing in Africa includes its regional funds in East, West and Southern Africa, which were launched in 2003 and between them have invested $140 million in 34 investee companies.

Meanwhile news reports say that Aureos has paid R66 mln ($8.5 mln) to increase its existing 10% stake in technology service provider Sandbox (www.sandbox.co.za) to 39%. The transaction was funded through the $254 million Aureos Africa Fund and the $50 million Aureos Southern Africa Fund. In 2008, the Southern African Fund bought 10% of Sandbox from the founding shareholders and Aureos simultaneously funded a 21% empowerment stake. The latest deal sees Sandbox management gaining 20%.

Aureos SA managing partner Ron den Besten is quoted as saying: “We believe that Africa has fantastic and exciting growth potential, despite the downturn in global markets. With Aureos’ networks throughout Africa and the emerging markets, we will be able to add significant value to the business.”

Sandbox was founded in 1998 and focuses on enterprise resource planning, customer relationship management, enterprise compliance, enterprise intelligent building management and integration, high-definition large-scale electronic and video surveillance, enterprise security and allied enterprise active audio visual systems. It operates in SA, the Middle East and the UK.

Paul Wootten, a Sandbox founding shareholder and current CEO, is reported as saying the Management Buy Out is part of the company’s growth strategy: “It is imperative senior management and, ultimately, all staff share in the financial performance they are called upon to deliver.” Sandbox’s strategy is to boost existing organic operations with strategic and complementary acquisitions, leveraging its current R350 mln ($45mln) turnover.

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