Archive for the 'Private Equity' Category
March 11th, 2010 by Tom Minney
The Aureos Africa Fund, which closed its fundraising in January with US$381 million, has completed a $10 mln investment in a leading Nigerian leasing company, C&I Leasing Plc. (www.c-ileasing.com). The fund is believed to be the largest fund ever to focus on investing in small to mid-sized businesses across Africa, and the latest investment brings its total investment in Nigeria to $40 mln.
Aureos Capital Ltd (www.aureos.com), a leading private equity fund management company specialising in investing in small to medium-sized businesses in emerging markets, manages the fund. Jacob Kholi, Managing Partner of Aureos in West Africa, comments in a press release: “Leasing is a fast-growing part of the financial services sector in Africa and we are delighted to have invested in a market-leading business that has ambitious expansion plans.”
C&I was established in 1990 and offers companies both operating and finance leases on various classes of assets. The company is active in other services such as car rental, car distribution and other logistics services. In 2007, C&I acquired a Ghanaian lease provider as part of its regional expansion strategy and is also exploring growth opportunities in the telecommunications, oil and gas, and fast-moving consumer goods (FMCG) sectors.
Davinder Sikand, Regional Managing Partner of Aureos in Africa, adds: “As with many other emerging markets, African economies have grown steadily throughout the global downturn. Nigeria is the second-largest economy in Africa after South Africa and with GDP increasing at over 5% per annum, Nigeria offers serious opportunities for private equity investment in SMEs with regional growth ambitions.”
“The success of Aureos in the region reflects its excellent deal sourcing capacity by having seasoned teams on the ground, and the ability to build a well diversified portfolio.”
Kholi says: “Whereas the Nigerian stock markets fell by more than 40% over the last two years, Aureos’ first generation fund’s portfolio in Nigeria grew by approximately 19% in value over that same period. We are excited to be forging strong relationships with small and mid-cap Nigerian businesses, and for Aureos Africa Fund to be able to capitalise on the strong track record we have built with our first generation Aureos West Africa Fund.”
“This new investment… is a demonstration of our commitment to West Africa, with the majority of our Nigerian companies having expanded their revenue base throughout the region.”
Aureos Capital is a private equity fund management company which specialises in providing expansion and buy-out capital to unlisted mid-cap businesses across Asia, Africa and Latin America. Since establishment in 2001, Aureos has increased its funds under management to over $1.2 billion and extended its geographical footprint to over 50 emerging markets, by establishing 16 regional private equity funds.
February 24th, 2010 by Tom Minney
Standard Chartered Private Equity Limited (www.standardchartered.com) recently announced $47.5million investment for a minority stake in Seven Energy (www.sevenenergy.com), a leading Nigerian gas exploration and development company, according to a report in Nigeria’s Vanguard newspaper.
Seven Energy was formed in 2007 and is focused on the provision of gas to leading industrial firms in Nigeria. Standard Chartered envisages that, in the medium term, the investment will Seven Energy’s existing management team in its drive as a pioneer and consolidator within Nigeria’s gas industry.
Christopher Knight, the Managing Director/ CEO of Standard Chartered Bank Nigeria Limited was reported as saying: “We are proud to invest in Seven Energy as Seven’s value proposition is uniquely hinged on the monetization of Nigeria’s substantial gas reserves to meet the country’s growing energy needs. Our established footprint in Asia, Africa, and the Middle East, along with our long history of supporting trade flows to and from these regions, places us in a unique position to provide vital funding to growing companies in growing economies.”
According to the report, Dr Yemi Osindero, Head of Standard Chartered Nigeria’s private equity business, says: “This will be an active year for us in Nigeria. We have long term equity capital available to assist good companies that want to accelerate growth. We also have a knowledgeable team to assist the management and shareholders of our investee companies to achieve their objectives.” Dr. Osindero will join the board of Seven Energy.
Marlon Chigwende, Head of Standard Chartered’s African Private Equity business, says: “We will continue to invest equity capital in strong businesses and management teams across the African continent. After a year of turmoil in the international debt markets, we see a clear need for committed equity to support growth.”
Standard Chartered Plc, headquartered in London and listed on both London and Hong Kong stock exchanges, ranks among the top 25 companies in the FTSE-100 by market capitalization. It has operated for over 150 years in some of the world’s most dynamic markets, leading the way in Asia, Africa and the Middle East. Its income and profits have more than doubled over the last five years, primarily as a result of organic growth.
February 23rd, 2010 by Tom Minney
The Aureos Africa Fund is busy with its mission – it says it is the largest fund ever to focus on investing in small to mid-sized businesses across Africa. Earlier this month it announced that it had closed its fund-raising after gathering US$381.1 million. The fund has already invested approximately $120 mln in 10 companies operating in a variety of sectors and regions.
It is managed by Aureos Capital (www.aureos.com), which specializes in investing in mid-sized businesses across the emerging markets and says that it was supported by a broad range of institutional investors attracting institutions from the US and Europe as well as Africa.
Sev Vettivetpillai, CEO of Aureos Advisers Ltd comments (in a company announcement): “Considering the weak fundraising environment for private equity over the last two years we are delighted with the strong interest shown by investors.”
“Many institutional investors are becoming aware that they have little or no exposure to what is becoming an increasingly robust and vibrant part of the global economy. As with many other emerging markets, African economies have grown steadily throughout the global downturn and unlike the western economies they have not had to saddle themselves with large public sector deficits to achieve that out-performance.
“Governments in Africa are now wedded to prudent fiscal and monetary policies, and legislative reforms continue to make Africa a far more welcoming environment both for foreign direct investment and for local entrepreneurs.”
The International Monetary Fund (www.imf.org) forecasts average real per capita GDP growth of 4% for Africa in 2010 compared to an average of just 1.1% for advanced economies.
The Aureos Africa Fund targets initial investments of up to US$10 million with a focus on businesses that have strong potential to expand on a pan-African basis within two to three years via “buy and build” strategies and/or through carefully executed organic growth. The focus is on returns generated from growth as opposed to leveraging and financial engineering.
According to Davinder Sikand, Regional Managing Partner of Aureos Africa: “Our strong performance in Africa has been based on adding value to our investments by offering day-to-day and strategic help to the businesses we invest in. We have a very strong local presence and that is an essential ingredient in today’s world of emerging market private equity.
“Small and medium-sized business are becoming increasingly important players in domestic and regional markets across Africa – they are a key driver of the continent’s economic growth.”
Aureos has funds under management of approximately US$1.2 billion and a geographical footprint covering over 50 emerging markets in Asia, Africa and Latin America, through the establishment of 16 regional private equity funds.
Investors in Aureos funds include institutional investors, bilateral and multilateral development finance institutions and high net worth individuals.
Investments made already include:
• A market leader in milk production in East Africa with one of the largest and most modern milk-processing facilities in the region.
• A leading Nigerian biscuit manufacturers with an established distribution network.
• A well capitalized and rapidly growing insurance company headquartered in Nigeria.
• One of the largest cement companies in Senegal, considered to be the most technically advanced and environmentally efficient cement company in West Africa.
• A fast-growing information and communication technology company in West Africa.
• A leading provider of building management & security software and business software in Southern Africa.
• A leading provider of business software and technology solutions with offices in Kenya, Uganda and Rwanda.
• A diversified manufacturing company includes industrial contracting and South Africas largest ship repair company.
• A West African residential property developer and real estate management company.
• A leading leasing company in Nigeria with a subsidiary in Ghana.
In conclusion, Davinder notes that the Funds pan-African structure helps to diversify the economic and political risks that have historically been associated with investing in Africa.
February 2nd, 2010 by Tom Minney
The World Bank (www.worldbank.org) continues to step up its investments into Africa, and in February expects first close on a $500 million sub-Saharan Africa, Latin America, and Caribbean private equity fund and a $200 million Africa Capitalization Fund to invest in banks that are key to stability in the banking system. This was part of the speech of World Bank Group President Robert B. Zoellick at the African Union Summit, Addis Ababa, Ethiopia on 31 January.
Zoellick said that the International Finance Corporation (www.ifc.org) is stepping up its equity investment capabilities: “We are also pioneering new ways to connect private investments to Africa. IFC recently created a new Asset Management Company (AMC) that will raise and manage private equity funds to co-invest with the IFC.”
He said the Bank was working with China to help create the infrastructure for manufacturing and other investments that will create jobs and products: “For example, Oriental China-Ethiopia Industrial Zone aims to promote the manufacturing and processing industry while functioning as a hub for trade, warehouse, and distribution. These partnerships could be a growing part of Africa’s future.
“We also are working to make Climate Investment Funds more attractive to Africa. As developed countries consider low carbon investments and funds to support adaptation, the World Bank needs to use its global reach and experience to connect Africa to these opportunities.
Other areas Zoellick emphasized were help to Africa to develop energy access and to develop IT. He told the summit gathering of Africa’s presidents and heads of state: “Sub-Saharan Africa uses only 8% of its hydro potential. And we need to connect new electricity supplies to transmission and distribution systems, preferably with regional integration, so every African has access to electricity.
“ICT is a key enabler of productivity and creator of jobs. It can help farmers, small businesses, and those excluded from traditional banking services. It can extend and speed up government services. In Ghana, the introduction of IT systems and Business Re-engineering resulted in a drop in average customs clearance time from 2-3 weeks to 1-2 days and a 50% increase in revenue. In Kenya, ICT slashed the number of days it took to register a vehicle from 30 to 1, as well as cutting off avenues for greedy hands.
He followed earlier thought leaders in the last year, also covered on this blog, in pointing to the transformations of the African economy. “With supportive government policies encouraged by World Bank knowledge service, African entrepreneurs changed facts on the ground”.
January 25th, 2010 by Tom Minney
A new fund is making good progress in raising up to US$55 million to be invested in business start-ups and small and medium enterprises in Kenya, Rwanda, Uganda, and Tanzania. The Fanisi Venture Capital Fund was set up with help from Norwegian Investment Fund for Developing Countries (Norfund) and incorporated in Luxembourg. Norfund is also an investor and a shareholder in the management company, Fanisi Capital Ltd.,,which is majority owned by Nairobi-based Amani Capital Ltd.
Fanisi has raised $40 mln in commitments and expects to reach its goal in the next 12 months. On 22 January, the Internatonal Finance Corporation (www.ifc.org), part of the World Bank group, announced it will invest $7.5 mln.
According to an IFC press release: “The fund plans to make investments between $500,000 and $3 million in a variety of sectors, ranging from manufacturing to technology, helping smaller enterprises and start-ups get the capital they need to create and expand businesses. It also will set up a business services support facility to help pipeline companies overcome technical and governance limitations, pre- and post-investment.”
It quotes Ayisi Makatiani, head of the fund’s investment team and CEO of the fund nabager: “IFC’s early and continued support to the Fanisi team has been extremely helpful, especially for a local and first-time fund management platform.”
IFC’s Gender Programme has agreed to support the business services facility, and IFC’s Rwanda Enterprise Development Programme will provide training support to the fund’s portfolio companies.
Haydee Celaya, IFC Director for Private Equity and Investment Funds, said, “IFC is investing in this local private equity fund that focuses in growing SMEs and startups at a critical time, when the region needs long-term financial and advisory support. The investment also will help build local fund management capacity.”
IFC is currently seeking a capital increase to strengthen its ability to create opportunity for the poor in developing countries—including by investing in private equity funds that target small enterprises in developing markets. Smaller enterprises are responsible for much of the job creation in the East African region.
January 21st, 2010 by Tom Minney
Egypt-based private equity fund Citadel Capital (www.citadelcapital.com) is to open an East African office in Nairobi during January. Citadel says it is independently ranked as Africa’s largest private equity firm, with US$ 8.3 billion in investments under control in 15 industries spanning 12 countries.
Citadel Capital listed for trading on the Egypt Stock Exchange (EGX) under the ticker CCAP.CA from Sunday 6 December 2009. Citadel Capital’s Chairman and Founder Ahmed Heikal said in a press release was not because management were selling, but in order to make it easier for Citadel to raise capital.
The fund plans to invest a further US$ 200-400 million over the coming two years in Kenya, Uganda and Tanzania, The fund is looking for investments in the region, including in agriculture, transport, mining, energy and financial services, including microfinance.
Mr Heikal says the move comes in the wake of investments in Sudan. To date, Citadel Capital’s investments in Sudan cover transport and logistics, financial services, cement, mining, agriculture, and oil and gas. “By the end of 2010, we will have invested more than US$ 900 million in that nation,” Heikal notes.
Citadel’s track record is of creating value across its investment footprint by transforming national leaders into regional powerhouses through smart deployment of capital and by attracting world-class management teams that have the know-how and experience to efficiently run day-to-day operations. These teams have the ability to help refine and execute the forward-looking strategies necessary to develop new business opportunities.
“Citadel Capital is uniquely positioned to apply the industry development model we honed in North African economies to markets in Kenya, Uganda and Ethiopia,” said Heikal. “East Africa’s appealing natural competitive advantages — including fast-growing consumer markets and large workforces — fit perfectly with our time-proven strategy of turning national players into regional champions.”
The firm’s expansion into East Africa will extend its business model into one of the world’s most fertile and unexplored investment environments.
It has already invested into ASCOM for Geology & Mining, the firm’s platform investment in the regional geological and mining services sector. This has established two joint ventures in Ethiopia and has been engaged in gold and other metal-exploration activities.
The African Development Bank (www.afdb.org) has invested in the Citadel Capital Joint Investment Fund, in support of its regional integration strategy. Attractions for the AfDB reportedly include success in job creation and poverty reduction, as well as the active role that managers take in the investee companies, which brings better governance, skills transfer, standardized processes, more competitiveness and better efficiency.
Citadel Capital fund managers have reportedly returned more than US$ 2.4 billion in cash to their co-investors.
January 19th, 2010 by Tom Minney
The Africa Health Fund, managed by private equity fund manager Aureos Capital (www.aureos.com) has made its first investment, acquiring a stake in the Nairobi Women’s Hospital (www.nwch.co.ke) for US$2.66 million. This is the first investment by the fund which was launched in June 2009 and aims to raise $100 million, with a final close this year (2010).
The fund is backed by International Finance Corporation (www.ifc.org), African Development Bank (www.afdb.org), DEG (Deutsche Investitions- und Entwicklungsgesellschaft mbH – www.deginvest.de, part of KfW banking group) and Bill & Melinda Gates Foundation (www.gatesfoundation.org). Together they have invested $57 mln. Aureos specialises in investing in small to medium-sized businesses in emerging markets.
The objective of the Africa Health Fund is to increase access to, affordability and quality of health-related goods and services for Africans, especially those at the bottom of the income pyramid. At the same time it hopes to provide investors with good long-term financial returns.
Nairobi Women’s Hospital provides health care services for women and children. It focuses on providing in-patient, out-patient and specialized services for women, including antenatal, gynaecology, obstetrics, breast cancer detection and surgery. Its Gender Violence Recovery Centre is believed to be the first in East Africa.
A proportion of the sum invested in NWH will be used to help fund a management buyout, with the balance going to the expansion of facilities such as clinics, beds, ambulances and operating theatres in the East Africa Region.
Sev Vettivetpillai, CEO of UK-based Aureos Advisers says: “Whilst we were setting up a unique HIV/AIDS risk management programme for our East African portfolio companies in 2008 we started to realise just how fragmented and under-capitalized the healthcare sector is in Africa.
“Many of the causes of the high costs and inefficiencies of the healthcare sector in Africa are essentially business issues that we hope the Fund, and the input of Aureos executives, will help to resolve.
“We believe the Africa Health Fund will make a valuable contribution to helping low-income Africans get access to affordable, high-quality healthcare services whilst at the same time providing satisfactory returns to our investors.
“Through the Africa Health Fund, we look forward to helping populate Africa’s private healthcare sector with growing, profitable businesses, well positioned to attract further domestic and foreign investment.
Healthcare in Africa and private equity
An IFC study “The Business of Health in Africa” finds that private sources fund 60% of healthcare financing in Africa and about 50% of total health expenditure goes to private providers. The report says that “the vast majority of the region’s poor people, both urban and rural, rely on private healthcare.”
Davinder Sikand, Regional Managing Partner of Aureos in Africa says: “The provision of capital to SMEs operating in the health sector in conjunction with professional private equity support will certainly increase the efficiency of the African health market. Aureos is well aware of the effects that health issues and under-resourced health services have on businesses because we work very closely with our investee companies. The economic, productive and emotional cost of workforces in poor health can be devastating on businesses. We have regularly helped our investee companies to devise remedial strategies.”
In 2007, Aureos wIth support from Norwegian Investment Fund for Developing Countries (www.norfund.no) did an analysis of healthcare provision in East Africa, including where the critical deficiencies in the African healthcare system lie. Given its extensive experience working with dynamic SMEs in emerging markets, Aureos identified how SMEs can plug the gaps in the African health market.
The Aureos study showed that much of the African healthcare sector suffers from severe structural and systemic bottlenecks. There is severe market fragmentation; inadequate, inefficient distribution channels; high manufacturing costs; price distortions in the market; lack of effective supply chains; absence of economies of scale; low productivity levels; and, in many cases, dependence on large international health providers.
Aureos researched the structure and segmentation of the African healthcare market. In doing so, it has determined trends in consumer demand, appropriate product pricing and market gaps which suggest investment opportunities. It identified market failures as well as the scope of the distribution chains as challenges in the environment. In drafting the strategy of deploying the Africa Health Fund, Aureos expects to work in innovative new partnerships with public and private organizations, entrepreneurs as well as domestic and international regulators.
Davinder Sikand adds: “We are very well placed to support solutions to the issues we have come to understand in the African healthcare market. Having worked in emerging markets for almost two decades, Aureos understands how production facilities, distribution systems and networks can be mobilized to reach under-served and low-income groups. This particularly applies in domains vital to healthcare, such as healthcare financing, medical manufacturing, healthcare training, telemedicine and pharmaceutical manufacturing.”
November 15th, 2009 by Tom Minney
Aureos Capital (www.aureos.com) at the start of November launched its $400m sub-Saharan private equity fund focusing on small- to mid-market companies. Aureos Africa Fund was launched after feasibility and due diligence studies funded by the Commonwealth Secretariat (www.thecommonwealth.org). It will provide long-term capital and support for promising and successful businesses across the continent.
Aureos has already raised $322.8 mln, a quarter of which came from financial institutions, including European pension funds. It is expected to close fundraising at the end of 2009.
The fund is the largest private equity vehicle targeting smaller African businesses. Aureos targets returns over 20% but charges management fees of 2.25% per year (an industry standard is 2%) to cover the many investment professionals deployed to identify suitable opportunities in Africa.
It has spent $106 mln on nine businesses in financial services, technology/media/telecommunications, fast-moving consumer goods, building products, real estate development and agriculture. The companies operate in more than 15 different countries, reflecting the regional character of most of the portfolio companies.
Sev Vettivetpillai, chief executive of Aureos Advisers, said: “It’s 18 months since we started the fund and we raised a very significant $300m plus for Africa in a very challenging market when most investors were pulling out of financial markets. But Africa is the next frontier market that is going to benefit from emerging market flows.”
Commonwealth Deputy Secretary-General Ransford Smith hailed the fund’s launch. He warned that investment in Africa was “critical” if recent development gains were not to be lost amid the current worldwide recession.
The Aureos Africa Fund makes initial investments of up to $10 mln each in small- to mid-size companies which have a strong potential to expand to pan-African businesses within 2 to 3 years via “buy and build” strategies and through carefully executed organic growth.
October 18th, 2009 by Tom Minney
Leading emerging markets investor Actis (www.act.is) tells African Capital Markets News that Africa will have a large role in US$750m Actis Infrastructure 2 fund, which closed on 6 October. The pan-emerging markets fund focuses on power generation and transport. “We are assessing investment opportunities across the continent and we will be looking to invest a significant proportion of our fund in Africa”, says Actis in an email to this blog.
Paul Fletcher, Senior Partner at Actis says: “The need to build infrastructure in emerging markets is one of the great investment themes of our time – power, roads, ports, airports and bridges – these are the means through which these countries will continue to grow and prosper.”
Actis, which took over many operations of the former CDC (Commonwealth Development Corporation), has invested in Africa for more than 60 years. Their African presence includes 40 people based in offices in Lagos, Johannesburg, Nairobi and Cairo, with many investment professionals in London. The fund says having people in country is the best way to build strong relationships to support business and investee companies. Local knowledge and relationships are invaluable for sourcing investment opportunities, developing local partnerships, and managing political and regulatory risk.
Partners Michael Till and Torbjorn Caesar lead the 14-strong infrastructure team, which has a combined 140 years of infrastructure experience and even longer in emerging markets. Their expertise includes infrastructure investing, operations, project finance and project development, having completed investments in over 20 countries in the fund’s target regions.
Actis already has infrastructure investments in Kenya, Tanzania, Uganda and Cote d’Ivoire. Approved and screened deals in the pipeline combine development and expansion across Africa and also India, Latin America and China.
The Actis Infrastructure 1 fund, established in 2003, included investments in 34 power investments across Africa, Latin America and emerging Asia. These were exited in 2007 through strategic asset sales to third parties. The fund generated a cash multiple of 2.0x and realised $1.7 bln and an IRR of 23.3%. Before 2002 Actis also had considerable transport experience.
The fund manager’s investment strategy also includes private equity and real estate. Actis closed its $2.9 bln private equity pan-emerging markets fund, Actis Emerging Markets 3, in November 2008.
September 29th, 2009 by Tom Minney
A leading Kenyan stockbroker says local investment company TransCentury (www.transcentury.co.ke) plans to list its shares for trading on a stock exchange. According to an interview with Reuters newsagency, Jimnah Mbaru, chairman of Dyer and Blair Investment Bank (www.dyerandblair.com), says they already offer an Over-The-Counter market in the shares, meaning the stockbroker has an informal market system in which “for anybody interested in selling some of their shares, we look for potential buyers of those shares”
He is reported as saying the shares trade on the OTC market at between KSh 48-50 ($0.64-$0.67) each. The company’s assets were worth KSh 13.12 billion ($176 mln) at the end of June 2008, up 64% on KSh 8 bln in 2007, according to a trading document, or KSh 41.55 for each of its 262 mln shares. Net profit was KSh 1.17 bln at the end of 2007, says the report, up 60% from KSh 729.16 mln the previous year.
Mbaru is also reported to be one of the top 10 shareholders of TransCentury and between them the top 10 owned 61.8% of the company at 31 December 2008.
The company’s portfolio includes shares in listed companies (including Equity Bank, Stanbic Bank Uganda, East Africa Cables, Kenya Power and Lighting, and Centum) and covers energy, railways, banking, food and agriculture sectors and real estate in Kenya, Tanzania, Uganda, Zambia and South Africa. It also invests in private equity funds run by Aureos Capital, Helios Investment Partners and Business Partners International, according to its website.
TransCentury says 40% of its portfolio is outside Kenya and aims to raise this to 50% in the next 3 months, according to the report. TransCentury began in 1997 making investments in listed companies. Buyouts and other opportunities in 2003.
Reuters quotes Mbaru: “It (TransCentury) is always out in the market looking for acquisitions. They are always raising more money so at one time or another, they may want to raise money through an IPO (initial public offer).”