Abraaj in $300m South African food deal

The deal comes as the firm is attempting to collect $1bn for two separate Africa funds

The Abraaj Group has acquired a majority stake in Libstar Consumer Holdings, a South African food manufacturer, according to a statement.

Abraaj bought Libstar from existing shareholders including Old Mutual Private Equity, a South African firm, pan-African private equity firm Development Partners International and Metier, another African private equity firm, with the deal valued at approximately $300 million, a market source told PEI.

Abraaj declined to comment beyond the statement. Development Partners International, Metier and Old Mutual Private Equity did not respond to a request for comment at press time.

Libstar manufactures a broad range of quality private label and own-branded products for the “rapidly growing” South African food, fast-casual dining, household and personal care markets. The company products range from cheeses, sauces and condiments, packaging supplies, baking aids, herbs and spices, beef and chicken products, pasta, imported European deli products, confectionery snacks, and detergents and washing powders. Some of Libstar’s customers include McDonald’s South Africa, Woolworths, Shoprite, Pick n Pay, Spar and Tiger Brands. Libstar operates through 23 business units located in five of South Africa’s nine provinces and employs about 4,200 people with nationwide manufacturing, supply and distribution capabilities.

The $56 billion South African grocery retail market and $14 billion food services market are estimated to grow at 7 percent and 9.5 percent per annum respectively to 2018, according to Abraaj. Libstar’s private label manufacturing, supply and distribution business has “strong organic growth potential given Africa’s low market penetration rates for private label products as well as the rising popularity of fast-casual dining across the continent,” Abraaj said.

Abraaj will support Libstar’s pan-African growth strategy which includes the introduction of new product lines and the upgrade and expansion of existing Libstar plants. Abraaj will also support Libstar’s buy and build strategy across South Africa as well as in Sub-Saharan Africa, the firm said.

It is unclear which fund Abraaj used for the investment in Libstar. The deal comes as the firm, which is led by founder and group chief executive Arif Naqvi, is currently attempting to collect $1 billion for two African-focused funds. The firm is trying to raise $800 million for its Abraaj Africa III, which will target mid-market growth opportunities in sub-Sahara Africa and $200 million for its North African Fund II, which will invest in small and medium-sized companies operating primarily in Morocco, Tunisia, Egypt and Algeria. The group, which has been investing in Africa for the past two decades, has deployed $2.6 billion across approximately 80 investments.