Ethos exits outsourcing company after 8 years

Ethos Private Equity has sold Tsebo Outsourcing Group having carried out a problematic disposal of a non-core on-flight catering business following the terrorist attacks of September 11, 2001 and ridden out price inflation in South Africa.

South African buyout firm Ethos Private Equity has sold its 53.8 percent stake in Tsebo Outsourcing Group to financial services group Absa Capital after eight years for an undisclosed sum.

Absa has acquired a 49.9 percent stake, Tsebo’s management has increased its stake to 20 percent, while existing shareholder Nozala Investments and incoming investor Lereko Investments will each take a 15 percent stake.

Early on in the investment Ethos disposed of a non-core on-flight catering business, but the sale was rendered problematic as itl was agreed before the September 11 terrorist attacks. The ensuing problems in the aviation industry delayed the closing of the deal. 

Tsebo works in the hospitality and facilities management service industry and employs more than 10,500 people.

Anthonie de Beer, a partner at Ethos said: “We went through periods of disposals of non-core businesses that took longer than we expected but we eventually achieved our investment thesis at the business although it took slightly longer than our normal investment hold of four to six years.” De Beer declined to reveal any financial details, but he said Ethos had been pleased with the return.

He said the firm had achieved its objective of building up the company’s facilities management division, which had been nascent when Ethos took over the company.

The length of the investment was also affected by “rocketting” food price inflation in South Africa during the firm’s ownership and the concomitant depreciation of the rand, he said.

Separately Ethos’ bid for Gold Reef Resorts alongside a consortium including US bank Goldman Sachs and the corporate division of South African bank Nedbank has been experiencing turbulence.

The bid has been delayed by a formal complaint lodged with the country’s gambling regulator by the gambling group Tsogo Sun citing irregularities in the bid process. The consortium may need to seek an extension of its January 31 transaction deadline should the legal difficulties prolong the bid beyond this date.

The firm appointed Clive Smith as chief executive of the company in 2004.