A brief history of lime

Johannesburg-based Ethos Private Equity has joined forces with compatriot Old Mutual Private Equity to take a 44 percent stake in Idwala Industrial, a producer of industrial minerals and chemicals. For Ethos partners Stuart MacKenzie and Anthonie de Beer, the acquisition has a sense of déjà vu; both were involved when Ethos invested in the business the first time round.

Idwala was established in 1998 as a result of an Ethos-led management buyout of the lime and industrial minerals division of listed conglomerate Alpha Limited, now known as AfriSam. The Idwala management team that led the buyout, Piet Ferreira and Trevor Wagner, are now retiring to be replaced by James Welsh and Wayne Brown, both from within the organisation, as managing director and deputy managing director respectively.

Ethos exited its first investment in Idwala, which wasmade from the firm's fourth fund, after six years. It was bought out by Tiso Group, a black empowerment investment company, and RMB Ventures, the private equity arm of South African financial services group FirstRand.

Idwala – the Zulu word for “rock” or “stone” – is a vertically integrated supplier of processed lime, calciumcarbonate and other industrial minerals.

The lime operation is based in South Africa's Northern Cape region and produces burnt and hydrated lime for the gold, base metals, chemical and pulp and other industries. The carbonates business is located in Port Shepstone, near Durban, and produces a fine white calcium carbonate powder used in the production of paper, plastic, paint and numerous other products.

When Ethos first invested in the business, the main driver for growth was the calcium carbonates side. A decade on and it's the lime processing and production capability which is providing the most exciting growth prospects. Lime is a vital component in the extraction process for gold and basemetals – a vibrant sector in Southern Africa – and is also used in the treatment of emissions, something which Stuart MacKenzie describes as a “blue sky opportunity”.

As well as sitting on significant lime deposits, Idwala offers its investors stability, says MacKenzie. “It is a good cash generator, grows through the business cycle and is diversified across both businesses,” he says.

Following the latest investment, Ethos's and Old Mutual's share of the equity is reportedly split 27 percent and 17 percent respectively – constituting the largest block of shares. Tiso Group has reduced its position in the business to 30 percent, but remains the largest single shareholder, while RMB Ventures has exited completely. Tiso's Nkululeko Sowazi continues as chairman of the Idwala board of directors.

Ethosmade the latest investment fromEthos FundV, while Old Mutual Private Equity committed through its current fund, Old Mutual Private Equity Fund II. Finance was arranged and underwritten by Nedbank Capital and Rand Merchant Bank, which continue to be the main lenders in Idwala together withMezzanine Partners.

Micro-insurance-focused Leapfrog Inves tment s has reached the halfway mark of its $100 million debut fundraising. The firm hopes to hold its first close in mid-March, having al ready garnered $50 million from limited partners such as the European Investment Bank and Dutch development finance company FMO. Leapfrog will make investments across developing nations in Sub-Saharan Africa and Asia.

Goldman Sachs's private equity group is taking a cautious view of emerging markets, says managing director Marc Boheim, and is yet to be tempted by Sub-Saharan Africa. “We have been looking at Sub-Saharan Africa quite closely for a number of years. The question is, ‘is there a great enough depth of manager?’” he told conference delegates in London, adding: “Historically returns have been somewhat volatile, particularly when you consider currency fluctuations.”

Africa-focused private equity firm Development Partners International (DPI) has backed South Africa-based telecom company Q-Venture with an undisclosed investment. DPI was founded by Miles Morland, formerly of London-based fund management business Blakeney Management, and Runa Alam, ex chief executive of New York-based private equity firm Kingdom Zephyr, in 2007. It has raised €272 million toward its debut fund, which it aims to close on €400 million in 2009.