Zephyr Management, an emerging markets investor, has made a good start in its efforts to raise $500 million (€354 million) for a pan-Africa buyout fund. The firm has secured a $250 million cornerstone investment from Saudi Arabian listed firm Kingdom Holding, led by executive chairman Prince Alwaleed bin Talal bin Abdulaziz Alsaud.
A source close to the fundraising says a first close is likely by the end of the year and a final close sometime in 2008. Zephyr is aiming to more than quadruple the size of its third fund, which closed on $122 million in 2004. The value of the 2004 fund is currently approximately three times the initial capital invested according to a source.
Zephyr's ambitious increase of capital under management is in keeping with the apparent scaling up of African fundraising generally. Funds in the region raised $1.6 billion in the first six months of 2007. This included pan-African buyout firm Emerging Capital Partners' $523 million fund and Helios' $300 million first fund. South Africa's Pamodzi Investment Holdings then raised a $1.3 billion resources-based fund in August, allowing African fundraising to move past the $2.35 billion collected in total last year.
The fundraising momentum is likely to accelerate further. Emerging Capital Partners, one of Zephyr's rivals in pan-African investment, revealed recently that it had deployed 80 percent of its $523 million fund in less than a year. When the fund is fully committed – which is expected soon – it is likely Emerging Capital Partners will attempt to raise a larger successor. Other firms raising pan-African funds at the moment include UK-based emerging market investors Actis and Aureos Capital.
Sources in the market say African private equity is coming of age, and it is highly probable that the region will see a number of $1 billion-plus funds raised in 2008. Zephyr may not join that category with its new fund but it surely will one day – especially if it continues to attract a royal seal of approval.
BRAIT ACQUIRES SOUTH AFRICAN BAKER FOR R1.5BN
Brait, the South African merchant bank, has bought domestic baker Premier Foods from the Foundation for African Business and Consumer Services (Fabcos) for R1.5 billion (€152 million; $215 million). The seller will receive R525 million in equity, while the remaining sum will be used to pay off the company's debt. Premier Foods grows and provides granary products such as Iwisa Maize Meal, Snowflake flour and Blue Ribbon bread. The company suffered R1 billion losses between 1999 and 2004, but has since become profitable. It was purchased in 2004 for an undisclosed amount by Fabcos, which was established in 1988 with the aim of bringing black businesses into the mainstream economy.
BARAKA CONSORTIUM BUYS KENYAN BANK
A consortium led by Kenyan buyout firm Baraka has bought local bank City Finance Bank for Sh570 million (€6.05 million; $8.57 million). The consortium bought a 25 percent stake in the bank, to complement the 26 percent stake already held by some members of the consortium. The structure of the bid was necessitated by Kenyan law, which only allows non-banks to own a 25 percent stake in a bank. Baraka is led by Kabuga Kariithi, the former chief executive of the Nairobi Stock Exchange. The investment is the first made by the firm.
KNIGHT FRANK TO LAUNCH EAST AFRICAN PROPERTY FUND
Rutley Capital Partners, the real estate private equity business of property agent Knight Frank, will launch an East African property fund by the end of the year, the firm said. The fund, which will be run in conjunction with ICEA Asset Management, a subsidiary of the Insurance Company of East Africa (ICEA), will invest in a balanced portfolio of prime properties in selected countries throughout the East African region. The main target countries include: Kenya; Uganda; Tanzania; Malawi; Democratic Republic of the Congo; Zambia; Botswana; Namibia; and Mauritius. The firm hopes to produce a return to investors of at least 20 percent per annum.
ecp deploys $500m three months after close
Pan-African buyout firm Emerging Capital Partners (ECP) is close to fully investing its latest $523 million (€369 million) fund. The firm's first independent fund is 80 percent committed three months after its final close in June this year. The firm began investing following the fund's second close in December 2006. Competitors such as the UK's emerging market private equity firms Aureos and Actis are also in the market to raise regional funds of a similar size to ECP's latest fund. It is likely ECP will attempt to move upwards in scale for its next fund given the competition. “When others begin to crowd your niche, you need to find another niche,” said ECP chief executive Tom Gibian.
ABSA DROPS R3.7BN BUILDING COMPANY BID
Absa Capital Equity Investments, a buyout firm owned by UK bank Barclays, has broken off talks to buy South African building supplies company Iliad for R3.7 billion (€382 million; $539 million). Absa broke off talks on the basis that the capital structure planned for the bid would not prove feasible. It was not officially confirmed that this was due to the tightening of the global credit markets. Barclays owns a 56.6 percent stake in Absa.
CDC INVESTS $30M IN MICROFINANCE
UK government-backed emerging markets investment firm CDC has committed $30 million (€21 million) to microfinance investor Minlam Microfinance Offshore Fund which invests across 20 countries mainly in Africa and Latin America. The fund has also raised nearly another $10 million from other investors, including its founder John Muse, cofounder of US private equity firm Hicks, Muse, Tate and Furst (now HM Capital). Microfinance typically involves the use of small loans of several hundred dollars to entrepreneurs in developing nations. It is becoming attractive to commercial financial services groups, having traditionally been an industry supported by non-government organisations. The World Bank estimates global microfinance initiatives have achieved compound growth rates of 13 percent.
ETHOS MULLS BID FOR LEATHER RETAILER
South African private equity firm Ethos Private Equity is considering a R1.28 billion (€131 million; $186 million) bid for local luxury leather retailer House of Busby. The offer would be pitched at R21 per share. At the time of going to press, no offer had been made. Ethos is investing its R5.5 billion fifth fund, which closed last year.