Alternative asset manager Duet Private Equity and the Asset Management Corporation of Nigeria are raising a distressed and turnaround capital and debt fund for food and drinks businesses in Nigeria.
The fund has a $400 million target and a pipeline to acquire AMCON's controlling shares and debt in six unnamed food and beverage companies. A further $200 million from the fund will be injected into the companies as preferred equity, the managing director of Duet's Africa team, Maty Ndiaye, told Private Equity International 's sister publication Agri Investor .
London-based Duet, which also has offices in New York, Dubai, New Delhi, Accra, and Cairo, will open an office in Nigeria. The fund will blend public and private financing, but the firm would not disclose further details on investors in the fund.
The six companies all have Nigeria brands. They have suffered because of excess and expensive bank debt and lack of growth capital, according to Duet.
“Access to capital is still a challenge [in Nigeria] and securing bank debt to finance entrepreneurs is a heavy weight on the business given the high interest rates charged by banks. Hence we believe our capital is very competitive in such a constrained environment,” said Ndiaye.
The food and beverage sector is a bright spot for the Nigerian economy, she added.
“Nigeria is currently going through a challenging macroeconomic environment. The non-oil sector, which has carried the Nigerian economy for the past several years, failed to do so [in] the first half of the year,” said Ndiaye. “However, sectors such as food and beverages and agro processing are still showing great resilience. We see these sectors as defensive and believe that with the recent currency devaluation the 'import substitution' theme will be even stronger in Nigeria.”
The ability to affordably source food within Africa is hampered by complex tax barriers and lack of infrastructure and liquidity. However, closing this gap also creates opportunities for primary and downstream food businesses, and investors. The African Development Bank, and governments like Nigeria, are making import substitution and blended financing a key part of their agribusiness investment strategy.
“This initiative will bring working capital for many companies … and it is in line with the current [Nigerian] administration's drive towards encouraging fresh injection of direct foreign capital into businesses,” said AMCON chief executive Ahmed Kuru.
IFC director of manufacturing, agribusiness and services Alzbeta Klein told Agri Investor in a recent interview that blended financing, including private-public financing partnerships, is becoming an increasingly popular investment strategy in Africa, and has been used by the IFC to mitigate risk in some investments.
Duet has previously invested in Ghana, Ethiopia and Ivory Coast. Portfolio companies include SAPLED, one of Ivory Coast's largest dairy and juice processing companies, and Ethiopia's largest brewing company, Dashen Breweries. It also has interests in several food retailers in Ghana.
Duet Group manages $5.6 billion in equity across its hedge fund, private equity and real estate businesses, according to its website . According to its PEI Research and Analytics profile , AMCON was created by the Nigerian government in 2010 to stabilise non-performing loan assets held by local banks.