Archive for the 'Venture Capital' Category

IFC’s notable transactions in year to June 2009

The International Finance Corporation (IFC), part of the World Bank group, committed investments in the following African countries last year: Angola, Benin, Burkina Faso, Burundi, Cameroon, Chad, Cote d’Ivoire, Democratic Republic of Congo, Ethiopia, Gambia, Ghana, Kenya, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, Sierra Leone, Sao Tome and Principe, South Africa, Tanzania, Togo, Uganda, and Zambia.

• IFC invested $18 million to help Green Resources plant 8,000 hectares of new forest in Tanzania. Green Resources will generate carbon credits from its operations, which it will sell directly to buyers from developed countries.
• IFC created a new private equity fund for Africa’s health sector, with the African Development Bank, the Bill & Melinda Gates Foundation, and the German development finance institution DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH. The fund reached a first closing of $57 mln (target $100-120 mln) to invest in small- and medium-sized companies, such as health clinics and diagnostic centers, to help low-income Africans gain access to affordable, high-quality health services.
• IFC provided a financing package of over $200 million to Ecobank Transnational Inc., a pan-African bank with a network of over 500 branches in 27 countries. The financing will support the bank’s expansion, promote lending to micro and smaller, and facilitate trade flows to the region
• IFC provided a $30 million guarantee facility to Stanbic Bank Ghana to help it increase financing to companies that purchase cocoa from small farmers in Ghana.
• IFC will provide a loan of $100 million to Kosmos Energy, one of the key partners developing Ghana’s offshore oil and gas Jubilee field, located in deep water some 60 kilometers off the coast of Ghana. The project will help diversify Ghana’s economy, meet domestic power demand, and generate revenue to support the country’s economic growth and development. IFC’s loan is part of a $750 million debt package for U.S.-based Kosmos that IFC helped mobilize, primarily from commercial banks. IFC also signed a $115 million loan agreement with British Tullow Oil, another key Jubilee partner, bringing IFC’s support for the project to $215 million. Kosmos and Tullow are independent oil and gas exploration and production companies.
• In Uganda, IFC signed its first risk sharing facility involving small and medium enterprises in the telecommunications sector. This project enables distributors of Zain products and services access to medium term financing through Stanbic Bank Uganda. IFC expects to see more projects of this nature in other parts of Africa.
• IFC provided $100 million in financing as part of a $400 million package to support Standard Bank’s trade-related lending in Africa. The transaction was part of IFC’s Global Trade Liquidity Program, which is expected to support up to $50 billion in trade in emerging markets and have a significant impact in Africa, where supporting continued access to finance is one of IFC’s priorities.

IFC aims to mobilize $15 bn for Africa over 2-3 years

The International Finance Corporation (IFC) announced that it committed to $1.8 billion worth of new investments across 30 countries in Africa in the fiscal year ended June 2009. The private sector investment arm of the World Bank Group rapidly increased activities to alleviate the impact of the global financial crisis on Africa’s poorest regions.

IFC earlier announced in May it is teaming up with other international financial institutions to mobilize at least $15 billion over the next 2 to 3 years to lessen the impact of the global financial turmoil on Africa. IFC will contribute at least $1 billion to promote trade, strengthen the capital base of banks and promote microfinance lending, and increase lending for infrastructure projects and other real sectors of the economy experiencing a shortfall in liquidity.

The 2009 commitment is 32% more than $1.4 bln in commitments (FY08), and the largest volume since its founding in 1956. IFC also delivered $26.1 mln worth of advisory services (up from $18.6 mln) as it expanded activities to have more impact in countries affected by conflict and where the private sector is at the very early stages of development.

According to an IFC press release (www.ifc.org), Jean Philippe Prosper, IFC Director for Eastern and Southern Africa says: “IFC stepped up financing and advisory services amid the turmoil in global financial markets to encourage African trade and investment flows and alleviate the impact of the global economic slowdown on the Africa’s most vulnerable.”

IFC continued to extend its regional reach in Africa to countries where it has traditionally been less active. IFC last year committed its first investment in Sao Tome and Principe, which became an IFC member state in October 2008, and opened new offices in the Central African Republic and Ethiopia (May 2009).

IFC’s strategy in Africa is based on three main components: improving the investment climate, enhancing support to small and medium enterprises, and developing new projects to support investments. IFC is also focusing on building infrastructure, advancing health care, developing agribusiness, reforming the investment climate, and promoting the recovery of countries affected by conflict.

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.

Emerging Capital Partners targets North Africa construction

Emerging Capital Partners (ECP) announced on 27 July it has bought controlling stakes in Shoresal and Almes – both North African construction companies – for a total USD $26.2 million. ECP (www.ecpinvestments.com) is an international private equity firm focused on investing across the African continent with a nine-year track record and the first to raise more than $1.6 billion to invest in companies across Africa.

It is expanding its North African investments.

Thomas Gibian, chief executive officer of ECP, says:  “ECP has invested in various African engineering and construction companies since 2006, and we have long been evaluating opportunities in the North African market…Unlike many western markets, North African real estate and construction is generally driven by a lack of supply to meet the increasing demand from both foreign and domestic companies.”

In Algeria, ECP acquired a $13.8 million stake in Shoresal, a real estate development company, which will use ECP’s investment, in part, to finance the development of a 14-storey Class A office tower in the Bab Ezzouar business district of Algiers. According to the company’s research, demand for office space in Algeria’s major cities is approximately eight times greater than the current supply, driven by a tripling in the number of multinational companies since 2000.

The investment was made through ECP’s MENA Growth Fund LLC, which was established in September 2007 to capitalize on investment opportunities throughout the Middle East and North Africa.

In Morocco, ECP invested $12.4 million in Almes, the holding company of Entreprise Marocaine de Travaux (EMT) and Somadiaz. EMT specializes in public works infrastructure projects such as dams, levees and airports. Somadiaz is an equipment leasing company that provides specialized equipment to commercial and industrial clients. The companies will expand in Morocco and into neighbouring countries – such as Libya and Mauritania – where demand for public works and other construction services are also high. ECP’s investment is in partnership with Alliances Développement Immobilier, a leading integrated real estate and tourism group in Morocco.

The investment in Almes was made through the Moroccan Infrastructure Fund, a joint venture between ECP and Attijariwafa bank, which was established in December 2006 to capitalize on the ongoing reforms that are spurring economic growth in Morocco. It targets numerous sectors including telecoms, transportation, energy, power and water.

“ECP views the construction markets across North Africa as uniquely poised for growth,” said Vincent Le Guennou, executive vice president of ECP. “We believe the strong supply and demand imbalance in the sector is a compelling reason to invest.”

West Africa private equity fund raises US$200 million

West African private equity fund manager African Capital Alliance (ACA) announced the first closing after raising US$200 million for Capital Alliance Private Equity III (“CAPE III”) fund. The fund targets opportunities in sectors such as financial services, oil and gas, power (electricity) supply, communications, manufacturing and services in Nigeria and the West African sub-region. The aim is to raise a total of $350 million.

Investors in CAPE III include international development finance institutions such as CDC Group, the European Investment Bank, the International Finance Corporation, and Netherlands Development Finance Corporation. Nigeria-based institutional investors including First Trustees Nigeria Plc, AIICO Insurance Plc, Africa Re-insurance Corporation and some high net-worth individuals have also made commitments. CDC Group, an emerging-markets fund of funds backed by the UK Government, announced that it had committed $50m to CAPE III.

CAPE III will seek to acquire significant interests in companies with high growth potential and up to 40% of the fund may be invested in companies in the energy sector.  Economic reforms and liberalization in Nigeria and other West African markets, a scarcity of capital, and relative availability of attractive assets have created unique private equity investment opportunities.

CAPE III is the latest private equity fund sponsored by ACA since its launch in 1997. ACA currently manages over $500 million of aggregate capital including a $170 million real estate fund launched in 2008. Having concluded the first close of CAPE III in May 2009, ACA is targeting a CAPE III final close with aggregate commitments of $350 million. ACA mobilizes long-term capital from institutional investors to promote private sector led investments.