When Washington DC-based Emerging Capital Partners (ECP) invested $14.8 million two years ago in rubber company Societe Internationale de Plantations d'Heveas (SIPH) in exchange for a 20 percent stake, many GPs would have been skeptical.
After all, the Ivory Coast, where one of the company's rubber plantations is based, was embroiled in civil war at the time. Although the situation has since been stabilised by the strong presence of international forces on the ground, the nation's problems have not been fully resolved.
Hurley Doddy, chief operating officer at ECP, says the political problems allowed his firm to pay an attractive price for the business. “As the company was export-oriented, we decided risk was reduced, especially as the government is protective of such industries and this company had political support.”
In June this year, ECP closed a $523 million fund to invest across Africa. “Africa as a continent is growing very well, up 6 percent this year with a lot of opportunities and few competitors in the areas we operate,” Doddy says.
SIPH has done much to lend ECP's strategy credibility, demonstrating revenue growth of 44 percent annually during the period of ownership. With production in excess of 92,000 tons a year, SIPH exports rubber through its two majority-owned subsidiaries Ghana Rubber Estates (Ghana) and Societe Africaine de Plantations d'Heveas (Ivory Coast), the latter of which is listed on the Abidjan Stock Exchange.
In 2006, the Ivory Coast operation acquired French tire manufacturer Michelin's rubber plantations in Nigeria in exchange for a 20 percent stake in the company. The business now supplies 50 percent of its produce to Michelin, which has been technical operator of both subsidiaries since 2003.
ECP exited SIPH on NYSE Paris Euronext in July, netting $49.8 million for its stake, representing a 3.4 times return. This particular political gamble appears to have paid off handsomely.
PAMODZI BREAKS BILLIONDOLLAR BARRIER
Pamodzi Investment Holdings, a South African black economic empowerment vehicle, has beaten the record for private equity fundraising in Africa with a $1.3 billion (€943 million) fund. The fund will invest in resource and resource-related sectors in South Africa and across sub-Saharan Africa. It attracted US investors such as energy company American Metals & Coal International. The growth of black-owned funds in South Africa has been driven by the government's Black Economic Empowerment legislation, which is designed to stimulate opportunities for black people to accelerate the country's recovery from its apartheid past.
CITADEL PICKS UP C$898M OIL COMPANY
Egyptian buyout firm Citadel Capital Company has bought Canadian-listed oil company Rally Energy for C$898 million (€620 million; $850 million) as an add-on acquisition to its portfolio company National Petroleum Corporation. Rally has primary operations in Egypt, through the Issaran oilfield, a heavy oil development opportunity. In Pakistan, Rally has a 30 percent stake in the Safed Koh Block, where it is targeting natural gas. Karim Sadek, managing director of Citadel Capital, said the deal would provide National Petroleum Corporation with its first exposure outside of Egypt.
CDC RECRUITS NEW INVESTMENT DIRECTOR
CDC, the UK emerging marketsfocused funds of funds manager, has appointed Hywel Rees-Jones to take on responsibility for its co-investment programme, global sector funds and microfinance across all of its core geographies. He was previously head of West Africa for Actis, the emerging markets private equity firm which split from CDC in 2001, having previously worked at CDC before moving to Actis. He will examine ways to deploy secondaries or debt funds in areas where private equity-style transactions are not appropriate.
CONSORTIUM PROVIDES $161M GROWTH CAPITAL TO NIGERIAN BANK
A consortium of five companies including AIG Investments and Emerging Capital Partners has provided Nigeria's Intercontinental Bank with $161 million (€118 million) of growth capital. Investors Emerging Capital Partners, Vectis Capital, Firstrand International, Rashed Abdulrahman Al Rashed & Sons Company and AIG Investments provided the capital. The transaction will support Intercontinental Bank's expansion strategy inside and outside Nigeria. The investment was part of a larger $850 million growth capital fundraising by the bank. It has a market capitalization of $3.5 billion on the Nigerian Stock Exchange and assets of $5.5 billion under management.
GARDNER TO RAISE $500M SOUTH AFRICA FUND
Christopher Gardner, the stockbroker who established Gardner Rich, an advisory service for US public sector and union pension funds, is raising a $500 million (€368 million) fund to invest in South Africa. Nelson Mandela is involved in the project, according to media reports. The aim of the project is to attract US investment back to the country. US investors pulled out en masse during the apartheid era and have yet to return to a significant degree. Gardner began his career in San Francisco in 1981 sleeping in homeless shelters and train station bathrooms with his young son by night, while impressing bosses as an intern at Morgan Stanley during the day. His story was made into a Will Smith film,
KGANYAGO SAYS TAKE-PRIVATE BIDS WORRYING
South African national treasury director general Lesetja Kganyago has criticized take-private bids. The director general in particular criticized bids using large amounts of leverage. “At some point somebody is going to be terribly hurt, because somebody is going to get the credit pricing terribly wrong. And I hope that the credit default swaps will save them when that day arrives and they are meeting their creator,” Kganyago said. The recent successful take-private bids for retailer Edgars ($3.5 billion) and financial services firm Alexander Forbes ($1.2 billion) have increased the attention the asset class receives in the country.
SOUTH AFRICA – FUNDRAISING AND INVESTMENTS, 2001–2006Pamodzi Investment's new $1.3bn (R9.5bn) fund (see page 40) should help push South Africa's private equity fundraising total in 2007 well beyond last year's record mark of R11.2bn