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.
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