Last week in brief… Deal news kicked up a gear in Africa's private capital markets compared with the prior week. The most notable private equity news did not concern a deal that was done last week, but rather the returns on two deals announced last year which completed in January.
In pulling off two of South Africa's largest historical private equity exits last year, Rockwood Private Equity announced that the deals achieved an aggregate internal rate of return that exceeded 23%, returning more than 6.5 times money. The sales of Safripol and Tsebo earned Rockwood around R9.4 billion (approximately $708 million at current exchange rates) in gross exit proceeds. You may remember in August last year, Rockwood, Thebe Investment Corporation and company management agreed to sell plastics manufacturer Safaripol in August last year for $310 million to KAP Industrial Holdings, a JSE Top 100 company. And just a month later, Wendel Group agreed to buy Tsebo Group from a consortium led by Rockwood in a deal valued at R5.25 billion (approximately $400 million today). Rockwood had originally acquired the facilities service provider in a secondary buyout from fellow South African investor Ethos Private Equity in 2007.
Of the deals that were announced last week, African Infrastructure Investment Managers is taking a 60% stake in DSM Corridor Group Tanzania, a specialist dry bulk terminal operator based in the Port of Dar es Salaam. The deal is being transacted via African Ports and Corridors Holdings, a strategic investment platform which will be used to acquire additional terminals and other corridor expansions in sub-Saharan Africa. According to Jurie Swart, African Infrastructure Investment Managers' CEO, a strong pipeline of dry bulk cargo investment opportunities is supported by the pressing need for greater efficiency at African ports and the development of private investment programs.
Africa Finance Corporation is part of a consortium of investors looking to back Alufer Mining in a deal valued at $205 million. Other members of the consortium include Orion Mine Finance and Resource Capital Funds, both mining-focused investors.
The capital will be used to fund the development of Guinea-Conakry’s bauxite mines. Alufer currently holds a ratified mining convention in the Bel Air Project in Western Guinea as well as licenses linked to the Labé Project in the central part of the country. The company has declared there to be more than 3 billion tonnes of minerals at both projects and expect to produce 5.5 metric tonnes of bauxite from Bel Air per year within the next two years.
Cytonn Investments, the Nairobi-headquartered investment firm, is taking a 25% stake in real estate developer Superior Homes in a deal worth a reported KShs 1 billion or $9.5 million. The deal allows Cytonn to expand their holding at a future date, if required.
Superior Homes has successfully established its brand as one of the leading companies in the country with a strong track record of delivering gated communities in Kenya. The firm, which has a strong pipeline of deals in both Nairobi and the Athi River Region, enjoys strong complementarity with Cytonn’s own development affiliate, Cytonn Real Estate.
BitPesa, the pan-African bitcoin payments startup, has closed a $2.5 million Series A round from several high-profile venture investors led by Draper VC, Tim Draper’s Silicon Valley firm. Other members of the consortium include Greycroft Partners, making its first investment in BitPesa and existing investors including Digital Currency Group, Pantera Capital Management, Blockchain Capital, Zephyr Acorn, FuturePerfect Ventures, Colle Capital and BnkToTheFuture.
Having launched in 2013, the company has now raised some $6 million. Today, BitPesa has served over 9,000 users, executing more than 34,000 transactions for individual and business customers who send and receive payments through BitPesa’s integration with over 30 currencies.
EXEO Capital, the partnership between South African private equity firm Agri-Vie and STANLIB, the pan-Africa asset management firm, held a first close for the second Agri-Vie fund last week, landing $100 million and beating the firm's initial target by 30%. Agri-Vie II will target opportunities in mid to lower mid cap food and agribusinesses, with a focus on those firms that add value in the food and agribusiness supply chain as well as those who product the inputs used by commercial agriculture. Typically, it’s expected that investments will range between $5 million and $10 million in size. The fund, which is a 10-year fund with the possibility of extensions, will look to deliver a net annual return in excess of 15%.
JSS Empowerment Mining Fund was officially launched last week to target opportunities to provide junior miners with working capital in deals averaging approximately $6.5 million in size. The fund is targeting R1 billion (approximately $75 million at current rates).
The fund, which is being structured as a Section 12J investment vehicle, has been established by Jaltech, a boutique advisory firm and Stefanutti Stocks, a JSE-listed construction company. The fund has 8 potential investments in its pipeline, totaling R703 million (approximately $53 million). Once the fund has received commitments of R500 million (about $38 million), the investment committee will evaluate their prospects for the fund.
Following the announcement in August last year of plans by a consortium made up of European development finance institutions and lenders to pool their financial services assets in Africa to create Arise, a $660 million private equity investment company, the new company was officially launched in Cape Town last week.
FMO, Norfund and Rabobank are backing the company with their stakes in financial services companies in 10 countries on the continent. The new strategy is to use the new platform as a launch pad to take minority stakes in additional companies in the sector and eventually expand the new company’s asset base to more than $1 billion in size.
And finally, in trend news, law firm Baker McKenzie's Global Transactions Forecast estimates that South Africa's M&A market will grow by 66% over the next 2 years, following a weak performance in 2016 due to economic and political uncertainty. With strategic assets available at a discount, private equity and "lazy capital" on corporate balance sheets will combine to stimulate inbound and outbound deal flow.
And Deloitte's Africa Construction Trends report finds that the continent has seen a downturn in both the number and value of infrastructure and capital projects on the continent in 2016, in contrast to prior years. Slowing global growth, weak commodity prices and other economic headwinds all share responsibility for the trends.
Allan Cunningham is a senior media executive who has spent the last 15 years of his career working for some of the world’s most respected M&A and Private Equity media companies including Dow Jones’s publications Private Equity Analyst and VentureWire and most recently, The Deal. He has built a number of successful digital and event content businesses, both subscription and sponsor-supported, delivering information and content-marketing services to clients in the M&A and broader deal ecosystem. He recently struck out on his own and launched Rowayton Press, a multi-platform media company focused on the private capital opportunities in emerging and frontier markets. Mr. Cunningham holds a Bachelors degree from Liverpool John Moores University in the UK.