Market News

Fairfax Africa in AFGRI and Nova Pioneer debt deals

Fairfax Africa, the $500 million investment subsidiary of Canadian life insurer Fairfax Financial, announced two Africa-related private debt deals last week totaling $43 million for AGFRI, an agricultural food services and processing company in South Africa, and Nova Pioneer, an independent school network with schools in South Africa and Kenya. In both cases, the capital has been earmarked to support each firm’s expansion goals.

Fairfax Africa, which already holds a 42.2% indirect interest in AFGRI, has agreed a secured lending arrangement valued at R300 million or approximately $23 million with the agribusiness. The facility, which is priced at 2% above South African Prime, expires on the 24thof December.

AFGRI is expecting to undertake an equity capital raise to continue funding its planned growth initiatives, which include growth-oriented capital expenditure and planned acquisitions.

In the second of the two transactions announced last week, Fairfax Africa is investing $20 million in Ascendant Learning, the parent company of Nova Pioneer, the education company catering to pupils aged from three to nineteen through its network of schools in South Africa and Kenya.

The transaction is structured as a secured debenture and warrant deal, made up of $20 million in secured debentures and 200,000 warrants. The debentures, which come due at the end of December in 2024, will charge a 20% interest rate and are redeemable at par by Ascendant any time after June 30th, 2021.

Each of the warrants, which are only exercisable after June 30th, 2021, can be exchanged by warrant holders for one of Ascendant’s ordinary shares. Should all the warrants be exercised, Fairfax Africa would own 200,000 or 9.2% of the firm’s issued and outstanding shares.

The deals cap an active 6 months of investment for Fairfax, which announced it was raising $500 million for public and private investment opportunities on the continent. Last week, the firm announced plans to take a 35% stake in Atlas Mara, an African banking platform with interests in seven African countries. Source: Africa Capital Digest

Kibo Capital backs Blowpast in undisclosed deal

Africa-focused private equity fund manager Kibo Capital Partners is backing Blowplast Ltd, a plastic packaging company based in Kenya. As part of the deal, Christoph Evard, who led the deal for Kibo, will take a seat on the company’s board. Financial terms of the deal were not disclosed.

The capital will be used to fund Blowpast’s expansion plans for East Africa and beyond. The company, which was founded in 1996, now has two main businesses—Blowpast itself, which produces plastic packaging for a variety of industries in East Africa, and Thermopak, which manufactures food grade disposable plastic packaging products such as glasses and plates.

The transaction is the fourth for Kibo’s second fund, which at last count totaled $63 million in commitments. Notable deals this year have included Kibo’s first PIPE or Private Investment in Public Equity deal at the end of March, which saw the fund acquire a stake in I&M Bank via an IPO on the Rwandan Stock Exchange. According to Christoph Evard, the fund expects to close another three transactions this year, with a potential two more in the first half of 2018.

Bowmans provided Kibo Capital with legal advisory services for the transaction, whilst Grant Thornton provided tax and financial advice. ERM and Crossboundary served, respectively, as E&S and market advisors. Source: Africa Capital Digest

Abraaj Group to Buy East Africa Food Chain Java House

Abraaj Group enters into a definitive agreement to acquire 100% of Java House Group from Emerging Capital Partners and company’s founder Kevin Ashley, according to emailed statement.

* Java House is a casual dining, food services chain in East Africa with 60 outlets;
* Abraaj plans to expand Java House across Africa;
* Freshfields Bruckhaus Deringer and Bowmans Kenya acted as legal advisers, while PwC acted as financial and tax advisers to Abraaj on the transaction;
* Financial details were not provided. Source: Bloomberg

Dangote Cement Gets $1b Afrexim Bank Facility for Expansion

Africa’s biggest cement maker will deploy funds from African Export Import Bank “to support expansion’’ on ‘‘a project by project basis,’’ Carl Franklin, a company spokesman, says in emailed response to questions.

* Company accessed $100m of the facility to fund truck purchases in Ghana and Tanzania;
* Earlier: Afrexim Bank Plans to Lend Dangote Cement of Nigeria $1b. Source: Bloomberg

Malawi’s First Merchant to buy micro lender Opportunity Bank

Malawi’s First Merchant Bank will buy the local assets of micro lender Opportunity International Bank of Malawi (OIBM), subject to regulatory approvals, the two banks said on Wednesday.

This will be the second major acquisition by FMB, listed on the Malawi Stock Exchange, after its acquisition of a majority stake in Barclays Bank of Zimbabwe.

FMB Chairman Hitesh Anadkat said the deal gives the bank leverage to increase market penetration by tapping into OIBM’s largely rural and social agent banking platform.

“OIBM customers will be quickly and easily transferred to FMB. Opportunity International will be able to tap into our infrastructure and our network to continue adding great value to our country,” he said.

The deal is subject to approval by Reserve Bank of Malawi and the country’s competition commission.

With assets of over $455 million, FMB also has stakes in banking operations in Mozambique, Botswana and Zambia.

Opportunity is a unit of micro-lender Opportunity International, but its “no-frills” banking and lending model faces hurdles in a small market where the two large establishments, Malawi’s National Bank and South Africa’s Standard Bank also offer SME banking. Source: Reuters

Co-Op Bank Kenya Secures 123m-Shilling Funding From IFC

Co-Operative Bank seeks financing to develop more loan products for small and medium-sized enterprises, Nairobi-based newspaper reports, citing International Finance Corp.

* IFC lent Co-op 10.7b shilling last year for SMEs, women and housing;
* NOTE: May 29, Co-Operative Bank Kenya Plans Further Regional Expansion by 2022. Source: Bloomberg

Blue Label Telecoms to buy mobile device supplier for $148m

South African telecommunications firm Blue Label Telecoms said on Tuesday it would buy a mobile device supplier for 1.9 billion rand ($148 million) to expand its existing business in that field.

Blue Label, the largest distributor of pre-paid voice and data airtime in South Africa, said it would buy shares in unlisted 3G Mobile Proprietary Limited in two stages with its subsidiary, The Prepaid Company Proprietary, initially acquiring 47.37 percent for 900 million rand followed by 52.63 percent to be acquired for 1 billion rand.

Blue Label said 3G Mobile would be used to expand into the financing and supply of mobile devices, handsets and allied products to distribute into the low cost smartphone market.

“Both of these functions supplement Blue Label’s strategic objectives to provide value added services to both Cell C and its own customer base. 3G Mobile provides the ideal platform to consolidate Blue Label’s low cost and certified pre-owned mobile handset divisions into a consolidated group,” the company said in a statement.

South Africa’s third largest mobile phone company, Cell C, and its creditors agreed a deal where Blue Label would pay 5.5 billion rand for a 45 percent stake in the debt-laden mobile firm.

The deal will give Blue Label a share of profits on a product it distributes as well as a major stake in a company facing a consumer backlash due to slow network speeds.

3G Mobile, which is one of Africa’s largest distributors, and financiers, of mobile devices and handsets, operates in 8 African countries.

By 0758 GMT, shares in Blue Label were treading water at 15.15 rand following the announcement. Source: Reuters

TLcom Capital holds $40mln first close for TIDE Africa Fund

TLcom Capital has held a $40 million first close for its TIDE Africa Fund, winning commitments from a combination of development finance institutions, Africa, European and American corporate investors and family offices.

Two development finance institutions are responsible for 50% of the commitments made for the fund’s first close – the African Development Bank and European Investment Bank are each investing $10 million in the 10-year fund, which is aiming to provide its investors with a net IRR of 16%.

TLcom anticipates hitting the fund’s target of $100 million in time for its final close in June 2018. The fund will back businesses that leverage technology to lower the cost of services to both Africa’s enterprises and consumers alike. Starting initially in Nigeria, Kenya and Ghana, the fund will source opportunities across several sectors including agribusiness, financial services, energy, education and healthcare, before going on to target similar opportunities in Ethiopia, Rwanda and Zambia.

The fund’s strategy will be to invest between $500,000 and $10 million to take equity stakes in early stage and growth stage businesses that are both scalable have a track record of rapid growth. It’s believed that the fund has a deal pipeline of more than six hundred companies, six of which are investment-ready for the first year of the investment period.

In conjunction with the fund raise, TLcom is also establishing the TIDE Foundation, a non-profit entity which will support the development of local entrepreneurs, allocating 1% of the 20% General Partner carry to entrepreneur education activities in the region. Source: Africa Capital Digest

LeapFrog Investments Invests $180m in Ghana’s Enterprise Group

The investment represents LeapFrog’s largest deal ever, according to e-mailed statement.

* Enterprise Group commitment marks first investment of LeapFrog Strategic African Investments (LSAI), a $350m fund in which Prudential Financial, Inc. is the primary investor;
* Capital injection will address growth opportunities in Ghana, expanding Enterprise Group’s market share, as well as buying out Sanlam Emerging Markets Proprietary Ltd. Investment;
* Upsurge in demand for financial services in Ghana has enabled Enterprise Group’s life insurance arm, Enterprise Life, to report a market-leading 26% compound annual growth rate in premiums between 2013 and 2015;
* Only 5% of Ghanaian adults have some form of insurance, but market growth is 30% per annum according to the World Bank. Source: Bloomberg

Curro Holdings Unit Stadio Buys Southern Business School

Private school operator Curro Holdings on Thursday entered into an agreement to acquire 74 percent shares of Southern Business School for an undisclosed amount through its wholly-owned subsidiary, Stadio Holdings.

This comes after Stadio acquired the South African School of Motion Picture Medium and Live Performance (AFDA) earlier this month, clearly demonstrating its strategy of creating further access to tertiary education through the expansion and development of its core brands. Curro’s acquisition of Southern Business School is subject to the fulfilment of certain conditions, including the approval of the requisite competition authorities.

Southern Business School is a South African registered higher education institution, with SBS Namibia being recognised by the Namibian Qualification Authority. Stadio will hold a 51 percent interest in Southern Business School of Namibia. SBS has 11 accredited distance learning programmes, ranging from higher certificates to masters’ degrees, with three academic schools which offer dedicated programmes as well as short courses.

Founded by Chris Vorster in 1996, the business school offers accredited programmes through distance learning, and has grown from 38 students in 1996 to approximately 9,956 students currently enrolled in South Africa and Namibia. In 2016, SBS launched a Bachelor of Commerce (Law) degree as part of its strategy to expand its range of programmes offered.

Curro said SBS will seek out growth opportunities by introducing new programmes as well as increasing its presence and reach geographically. Curro also re-affirmed its intention to unbundle and list Stadio separately during the course of this year. Source: IOL

EuroMena Funds announce acquisition of minority stake in Retail Holding, Morocco

EuroMena is pleased to announce the acquisition of a minority stake of Retail Holding SA (the “Group”), a leading Moroccan Retailer. Proceeds of the investment will mainly be used to fund the expansion of the Group.

The Group was established in the mid-80s by Mr. Zouhair Bennani, initially as a single supermarket in Rabat, operating under the Hyper brand. Over the years the Group grew substantially, and is now one of the major retailers in Morocco. Retail Holding is the franchisee for French giant Carrefour, apparel retailer Kiabi, Virgin Megastore and fast food chain Burger King. The Group recently started its expansion to Africa by taking the control of CDCI (Compagnie de Distribution de Côte d’Ivoire), the second largest player in food distribution in Ivory Coast. It is now the number one player in the supermarket segment, the pioneer and only player in the hypercash segment, and a leader in the commercial real estate sector.

Furthermore, the Group is well positioned for a healthy growth in the coming five years as it will capitalize on the shifting retail landscape in Morocco, where the government is promoting the development of large modern retail spaces, and on the sub-Saharan expansion opportunities.

Gilles de Clerck, Executive Partner of The EuroMena Funds, mentioned on the occasion “EuroMena is proud to join the retail leader at such an important time for the group, in which it is rapidly expanding in Morocco and regionally, led by an experienced management team”.

Paul Khoury, Partner of The EuroMena Funds, added “We are confident that the group is well positioned for a healthy growth in the coming years, with the government promoting the development of modern retail and a shift in consumer behaviour towards the growing channel”.

Zouhaïr Bennani, Chief Executive Officer of Best Financière, stated “We are proud to welcome The EuroMena Funds, a leading private equity firm invested in the MEA (Middle East and Africa) region, as a shareholder of the group and in supporting the development of the company, especially its Label’Vie and Compagnie de distribution de Côte d’Ivoire subsidiaries, both leaders in their respective markets”.

EuroMena has accumulated significant experience in the retail sector through its investments in Khoury Home, the leading retailer of home appliances and electronics in Lebanon, and the Indigo Company, a Tunis based apparel retail of international brands with a strong presence in Morocco and Algeria. In line with its strategy, EuroMena will assist the top management of Retail Holding in its growth strategy in the North and Sub-Saharen Africa regions, in which the Fund enjoys a wide network and significant market knowledge.

This transaction is the fourth investment of EuroMena III following the investments in Elephant (FMCG, Nigeria), in Indigo Company (apparel retail franchising, Tunisia, Morocco and Algeria), and in Credit Libanais (banking, Lebanon). Source: Arab Finance

Bob Diamond’s Africa Bank Ups Stake in Union Bank of Nigeria

Atlas Mara Ltd, the African investment vehicle of former Barclays boss Bob Diamond, said on Wednesday that it plans to raise $200 million to increase its stake in Union Bank of Nigeria and to scale up other businesses.

Atlas Mara said it was buying a 13.4 percent stake in the Union Bank of Nigeria from Clermont Group, taking its total holding to 44.5 percent.

The bank said it is in discussions with potential investors regarding a possible raising of new equity capital, comprising of $100 million equity offering and a $100 million mandatory convertible bond.

Diamond teamed up with Africa-based entrepreneur Ashish Thakkar to set up Atlas Mara, a vehicle through which they planned to buy up assets to help build it into a powerful force in African banking. Source: Reuters

XSML takes stake in DRC’s retail chain, Galaxy

XSML, the fund manager active in Central & East Africa, announced its investment in Maison Galaxy sarl (Galaxy), a retail chain based in Kinshasa, DRC, known for its Shaina and Galaxy branded stores.

Galaxy has been successful in tapping into the increasing demand for cosmetic and other popular consumer products in DRC. The investment helps Galaxy to expand its distribution network by enabling the opening of several new stores.

Galaxy was founded in 2014 and operates eight stores in Kinshasa, Goma, Katanga and Kisangani. The Managing Director of Galaxy, Ashiq Adatia, is in process of merging Galaxy with its sister chain Shayna, which is also focused on cosmetics and general products and operates ten stores in Kinshasa and other locations in DRC.

According to Ashiq Adatia: “With the financing provided by the African Rivers Fund, Galaxy is setting up three new stores and increase our stocks, a step change in our expansion.”

Marcel Posthuma, Managing Partner at XSML says: “The urban population of Kinshasa is looking for affordable beauty and other consumer products. Galaxy has a reputation on this front and now operates eight stores. It is the first larger retail chain of its kind, bringing affordable products to the population”

Galaxy, is one of ARFs fifteen investments since first close of the fund in February 2016. The African Rivers Fund (ARF) is XSMLs second fund, after having fully invested its maiden fund, the Central Africa SME Fund (CASF) in the period 2012-2015. As its predecessor, ARF targets growing, well-managed small and medium-sized enterprises (SMEs) in the Central & East African region covering Democratic Republic of Congo (DRC), Uganda and Republic of Congo as well as – over time – Burundi. The fund is named after the two most powerful rivers in Africa, the Congo and Nile Rivers, which embody the potential of the Central & East African region.

XSML believes that sustainable economic development in fast growing markets as the DRC and Uganda can be achieved by encouraging local entrepreneurship. Currently, many opportunities in these countries remain unexploited due to the lack of risk capital and support.By stimulating entrepreneurship, jobs and income are created. The African Rivers Fund continues CASF’s strategy with investments in between USD 100,000 and USD 5 million. Between the two funds XSML has provided technical assistance to some 28 companies to help them improve their operations and skills. Evidence of further impact can be found in various fields, with over 500 jobs created since 2011, over 4,000 additional pupils spread over three private schools and the addition of some 40 hospital beds, an operating theatre and maternity rooms in a clinic in Kinshasa, improving healthcare standards. All three investors in CASF (IFC, FMO and Lundin) were joined by Bio, CDC, DGGF, and Proparco for ARF.

About Galaxy
Galaxy is a retail chain specialised in cosmetics and other consumer products, founded by Ashiq Adatia in 2014, and operating eight stores.

About XSML
Although international investors show an increasing interest in emerging markets, the demand for finance from small and medium sized enterprises (SMEs) remains largely untapped.

XSML, eXtra Small Medium Large, founded in 2008, bridges this gap by investing in small businesses to help them grow into medium and large enterprises. XSML manages two funds with a focus on frontier markets in Central and East Africa: the Central Africa SME Fund and the African Rivers Fund. Local teams of 14 investment and operating professionals have experience in emerging and frontier markets in private equity, corporate and development banking and corporate restructuring with offices in Kinshasa (DRC), Kampala (Uganda) and Bangui (CAR). Source: Press Release