Abraaj, MCP, Cauris and Other Private Capital Investments in Africa

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 Tuesday, October 18, 2016 8.28PM / Allan Cunningham

On Monday mornings ACDpublishes last week's most noteworthy news stories and information about the private equity, venture capital and infrastructure investment markets related to Africa.   

Here is a summary of last week's most notable deals, fund raises, people moves and more.  

 

Deal activity in Africa bounced back last week, featuring both acquisitions and exits by private capital investors focused on the continent. High-profile growth markets investor The Abraaj Group was among them, spending an undisclosed amount to acquire a minority stake in Indorama Fertilizers, the largest manufacturer of urea-based fertilizers in sub-Saharan Africa. The investment is a bet, of course, on long-term growth for the fertilizer company, driven by rising populations and rising incomes creating more demand for food on the continent. Given urea's high nutrient content, its ease of use and Indorama's competitive production costs and execution capabilities, Abraaj feels that the firm is well-placed to become a key global producer and exporter.

 

In Morocco, Mediterrania Capital Partners is taking a significant minority stake in Université Privée de Marrakech (UPM) through MCP II, its second, €120 million fund. While no further details of the transaction were disclosed, Mediterrania Capital typically targets growing SMEs with an equity value ranging from €25 million to €400 million which have growth ambitions in both North Africa and sub-Saharan Africa. With this deal, MCP joins fellow private equity firm Development Partners International in UPM's capital structure following the London-based fund managers $20 million investment in March 2014.

 

West Africa-focused investor Synergy Capital Managers announced the seventh deal for its $100 million private equity fund last week, making an undisclosed investment in Vester Oil Mill, one of Ghana’s largest seed oil mill operators. With the additional capital and access to Synergy Capital’s expertise and networks, its hoped to expand the company to offer edible food oils for end users across West Africa and beyond.

 

Across the continent in East Africa, meanwhile, Nairobi-based Catalyst Principal Partners announced it is taking a controlling stake in Zenufa Laboratories, a Tanzanian pharmaceutical manufacturer. While additional terms of the deal were not disclosed, Catalyst Fund I typically aims to invest between $5 million and $20 million in its transactions, looking to generate net cumulative returns of between 20% and 25%. The Zenufa deal is the fund’s eight transaction and fits well with its strategy of backing emerging or mid-sized companies which are poised to benefit from market demand generated by the region's emerging middle class.

 

Cauris Management, the first regional private equity fund manager established in Francophone West Africa announced full exits from two financial services portfolio holdings at the end of September. The first stake, in Atlantic Business International, (ABI), a financial services partnership between West Africa’s Atlantic Financial Group and Morocco’s Banque Centrale Populaire, was first backed by Cauris in December 2012 in a €6.3 million equity/debt transaction. The holding is being sold to Banque Centrale Populaire, earning Cauris a 1.7x return.

 

The second exit for Cauris sees the sale of its stake in Bridge Bank Group Côte d’Ivoire (BBG-CI) to the Teyliom Group, earning a 3.1x return on its investment. Cauris originally invested 600 million CFA in the company in 2008, making a follow on investment two years later of 400 million CFA.

 

At the venture end of the private equity investment scale, Silvertree Capital has backed Carzar, an online marketplace for the second-hand car market, in an undisclosed deal. The company offers a solution that addresses a large market, tapping into and improving an existing customer need without having to spend significantly on marketing to change customer behavior. This large market, with an attractive economic profile, a strong management team and significant traction were all key factors in Silvertree’s decision to back the company.

 

Finally, for some interesting perspective last week, The New York Times Dealbook column follows Abraaj’s Khawar Mann as he explores opportunities to develop private healthcare in Africa and other emerging markets, getting a better understanding of the leading private equity firm’s approach as well as some of the typical challenges investors encounter. It's a good read.  

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