Kohlberg Kravis Roberts is considering establishing an office there, Henry Kravis told The Wall Street Journal in a rare interview in January. David Rubenstein, the co-founder of The Carlyle Group, told Private Equity International that a new office is a possibility for his firm as well. South Africa is very much in the limelight.
Two leading South African private equity firms have been busy replenishing their coffers. Ethos Private Equity closed Ethos Fund V on R5.5 billion ($750 million; €589 million) in October last year. Brait Private Equity, meanwhile, recently closed Brait IV on $880 million – ahead of a $550 million target, and the largest domestic fund raised in South Africa to date.
Opportunities abound for private equity in South Africa, say professionals familiar with the region. The presence of experienced debt providers like Credit Suisse, for example, assists the ability to execute large investments, says Andre Roux, Ethos's chief executive.
Nathan Mintah, managing director of the South African firm Equivera Capital, says strong economic fundamentals are also a lure for private equity firms. “There has been high economic growth supported by relatively high commodity prices despite the recent correction,” he says. Low competition for deals, compared with Europe and the US, is also an important factor.
In terms of where the money's going, the telecommunications, mining and metals, energy, oil and gas sectors have all received attention from GPs. However, the retail sector is the most popular lure, according to Mintah. Edgars Consolidated Stores, a South African department store chain, has reportedly drawn the attention of the likes of Blackstone Group, Bain Capital and KKR. It is anticipated that any sale of Edcon would be worth more than $3 billion.
Of course, life in any market is never plain sailing. In the second half of last year, the nerves of private equity professionals in South Africa were tested by an interest rate rise in response to strong inflation. But it will likely take more than this to dent the confidence of the growing numbers of GPs who view South Africa as a hidden gem.
CDC BACKS CITIGROUP'S FIRST DEDICATED AFRICAN PRIVATE EQUITY FUND
CDC Group, the UK governmentbacked private equity emerging markets fund of funds investor, has committed $100 million (€77 million) to Citigroup's first dedicated African private equity fund, CVCI Africa Fund, CDC said in a statement. The fund will be managed by Citigroup Venture Capital International, a division of Citigroup Alternative Investments. CDC will be the sole investor. The fund, which will target Sub-Saharan and North Africa, will invest alongside CVCI's managed emerging market private equity funds. The amounts invested by the fund and other CVCI managed funds are expected to be between $20 million and $60 million. Richard Laing, chief executive of CDC, said the fund would target infrastructure, natural resources, energy, telecoms and general manufacturing.
GP INVESTIMENTOS CREATES REAL ESTATE GROUP
Brazilian private equity firm GP Investimentos has created a new division, BR Properties, that will focus on making investments in office buildings, warehouses and retail stores. Co-investors include Lehman Brothers Real Estate Partners, Sandell Asset Management, Tudor Group, Banco Safra, Talisman Special Purpose Fund, The Peter Malkin Family and Belfer Management. The groups will commit a total of $100 million (€77 million) to create the new division, a statement said. GP Investimentos will commit 30 percent of the total capital of BR Properties, a commitment that will come from its third fund, GP Capital Partners III.
BROAD COVE COMMITS TO GHANA MORTGAGE FINANCING
Hingham, Massachusetts-based private equity firm Broad Cove Partners has committed approximately $30 million (€23 million) to invest in mortgage finance and affordable housing in Ghana. Broad Cove manages GHL-USA Investment Partners, a partnership between the US federal agency The Overseas Private Investment Corporation (OPIC) and Ghana Home Loans Limited (GHL). The Broad Cove commitment is intended to be deployed over 18 years. The money “will allow GHL to originate US-style residential mortgage loans to finance the acquisition of single-family residences in Ghana, a relatively poor country of about 20 million people where an average family of four lives on less than $2,000 per year and where a lack of mortgage institutions has made it very difficult for middle class families to own homes,” Broad Cove said in a statement.
ADVENT ACQUIRES BRAZILIAN LAUNDRY COMPANY
Atmosfera, a Latin American textile services company owned by global private equity firm Advent International, has bought Mr. Clean, a Brazilian industrial laundry firm, for an undisclosed amount. With over 200 customers and annual sales of $20 million, Mr. Clean provides hotels and restaurants with textile services such as linen rental and cleaning, uniform maintenance and cleaning, guest laundry and customized services. The company operates in São Paulo, Rio de Janeiro, Salvador, Recife and Natal. Advent has plans to expand Atmosfera in Latin America and possibly also into Europe, Erwin-Theodor Russel, a partner in Advent's São Paulo office, said in a statement. The firm is also considering an IPO on the São Paulo Stock Exchange in 2007, the statement added.
CONDUIT CAPITAL PROMOTES FIVE TO PARTNER
Conduit Capital, a New York-based private equity firm that specialises in the independent electric power industry in Latin America and the Caribbean, has promoted five of its investment professionals – Eyob Easwaran, Marc Frishman, Samuel Gómez, Juan Páez and Liliana Rauch – to partner. The five individuals worked on the first two Latin Power funds launched by Scudder Stevens & Clark, a mutual fund business now known as DWS Scudder, in 1993. Deutsche Bank acquired the funds in 2002. When J. Scott Swensen and George Osorio, Conduit's chairman and managing director, respectively, founded Conduit in 2003, the five joined the firm and brought the Latin Power funds with them. Conduit invests in Mexico, Chile, Peru, Brazil, Argentina, Colombia, Jamaica, Honduras and Guatemala. It closed its Latin Power III fund on $393 million in July 2006.
DARBY INVESTS IN BRAZILIAN AIRLINE
Darby Overseas Investments, the private equity branch of Franklin Templeton Investments, made a $25.2 million investment in BRA Transporteos Aereos, a Brazilian airline, in January. Darby made the investment using Darby-BBVA Latin America Private Equity Fund. Other investors include Bank of America, Development Capital, Gavea Investment Fund, Goldman Sachs, HBK Investments and Millennium Americas. The airline's founders, Humberto and Walter Folegatti, will remain with the company.
AUREOS TO DOUBLE FUNDS
UK-based emerging market fund manager Aureos Capital has announced plans to double its funds to $1.2 billion by 2009. At its sixth annual conference for investors, Aureos Advisers chief executive Sev Vettivetpillai said the firm will launch new funds. He also indicated that it would open ten new offices, bringing its international locations to a total of 32. Aureos plans to launch Aureos Central Asia Fund, a $120 million (€92.4 million) fund focused primarily on the Caspian Basin and including Kazakhstan, Uzbekistan and Azerbaijan, in 2007. That fund will be managed out of the firm's new office in Kazakhstan and will have its first close in the first quarter of this year. Aureos will also this year launch the Aureos Latin America Fund, a $300 million fund to be invested in Central America, Mexico, Peru and Colombia.
BEAR STEARNS BUYS LATIN FINANCIAL BUSINESSES
Bear Stearns Merchant Banking, Bear Stearns' mid-market private equity affiliate, has made its first investment from a $2.7 billion (€2 billion) buyout fund, buying two Latin American divisions of US bank Wells Fargo. The two businesses provide unsecured personal loans, sales finance and related credit insurance products in Panama, Aruba, the Netherlands Antilles, Trinidad and Tobago and Mexico. Terms of the transaction were not disclosed. It is the first investment from Bear Stearns' third private equity fund, Bear Stearns Merchant Banking Partners III, which closed in August last year.