Bankelele

Using Pensions to fund Private Equity & Venture Capital

The recently passed Kenya finance budget 2015/16 had some changes that affect licensed retirement benefit schemes.

The main one was to allow pension managers to invest up to 10% of retirement funds they manage into private equity and venture capital investments that are licensed by the Capital Markets Authority (CMA).

Pensions can also invest up to a maximum of 15% their funds in any asset class, bond, equity or security issued by a single issuer, but this exception does not apply to government securities.

The new rules also bring in term limits, as trustees are now limited to serve two terms of a maximum of 3 years each and are contained in legal notices 109-112 of 2015.

Blogging in 2013

Top blog posts in 2013

1. Consumer Guide on Solar for Homes
2. Kenya Bank Rankings 2012 (Part I)
3. Kenyan M&A
4. Private Equity Moment
5. Subway (Restaurants) to Kenya
6. Why Unit Trusts are better than Bank Savings Accounts
7. Chama Management 101 (a book review)
8. Paypal in Kenya
9. Base Titanium aims to be a model for the Kenya mining sector
10 Buyouts, Vultures, Divestments

So lot’s of interest in reading up merger and investment activity in Kenya this year, but, overall, the top posts visited were Safaricom/CBA launch M-Shwari and Who Created M-Pesa both published in 2012.

New African ICT VC Fund

Last week, saw the launch of a new Convergence Partners Communications Infrastructure Fund (CPCIF) from Convergence Partners. It is a pan African fund that has raised $145 million (from the IFC, EIB, FMO, DBSA and CDC) that they are seeking to invest in companies in communications, fibre, infrastructure, data centres etc. in countries like Kenya , DRC, Rwanda, and Sudan.

The Fund will target established companies with sound management, that are aiming to improve products or quality, or add value to their services – to invest amounts of about of $20-30 million in exchange for stakes of 15-49% with a horizon of about 10 years.

Their past portfolio includes investments in Seacom, New Dawn (with Intelsat) and Internet Solutions (who are taking over at Access Kenya and they plan to open an an East African office soon.

Separately, in a nice post, @Wanjiku asks if there’s a racial bias in ICT funding from venture capitalists in Africa.

NSE Moment: Buyouts, Vultures, Divestments

A look at recent deals at the Nairobi Securities Exchange (NSE) and other privatization and equity bids since the last update.

Divestments

Essar released a bombshell from India that they would be abandoning their investment in the old Kenya Pipeline Refineries and sell their stake back to the Kenya Government for $5 million. At the same time a Receiver Manager put up (the closed) Pan African Paper Mills up for sale, but that is likely to be complicated by links the company had with vulture funds who purchased Panpaper’s debts in the international secondary debt market. These faceless entities — basically different mutations of one group (going by the names like Noon Day Asset Management Asia and Farallon Capital Institutional Partners) — and 11 such firms own 37% of the company’s debt.The Essar fallout prompted Parliament to also look into the mystery of Orange Kenya which keeps asking for more government support even as the government loses equity in the company.Since then, the government announced that a new office will advise the government on state investments: Attorney-General Githu Muigai said the Government Transaction Advisory Services Office will guide state deals with the aim of sealing opportunities where the latter has been losing its shareholding in parastatals without monetary gain.
EDIT: Another divestment is Kenya Wine Agencies Limited (KWAL) finally exiting Uchumi after disposing of all its shares. It had 18% in 2004 and 4% in 2012. – via @NSEKenya

Done Deals

Recent M&A deals approved by the Kenya Competition Authority include:

Agri-Business: The acquisition of Juhudi Kilimo (turnover of Kshs 30 million) by Soros Economic Development Fund.
Aviation: The acquisition of Lady Lori Kenya by Ian Mbuthia Mimano, Adi Vinner and Peter Nthiga Njagi.
Education: The purchase of 60% of Safer World Investments by School Operators Limited (owners of Peponi School) (The two will have a combined turnover of Kshs 672 million or ~$8 million)
Finance & Banking: The acquisition of Francis Thuo & Partners by Equity Investment Bank.
Food: The acquisition of 66% of Coca-Cola Juices Kenya by the Coca-Cola Export Corporation.
The acquisition of Lonrho PLC by FS Africa (as part of a $280 million deal in South Africa).
The acquisition of Ma Cuisine by Harper Holdings.
Health: The acquisition of Jampharm Chemist by Viva Afya (the two have a combined turnover of Kshs. 19.5 million).
The acquisition of Ascribe Group (which has a turnover of Kshs 70 million) by Emis Group.

Deals Bubbling

Brookside Dairies have taken over Buzeki, the makers of Molo Milk, in a Kshs 1.1 billion ($13 million) deal that increases Brookside’s share of the dairy market to 44%. – EDIT GAZETTE NOTICE No. 15068 – THE TRANSFER OF BUSINESSES ACT: NOTICE is given that the furniture, fittings, fixtures and the assets and the stock being the business of manufacturing and selling of milk and milk products owned by Buzeki Dairy Limited (the “Transferor”) on the premises situated at Ganjoni, Mombasa have been sold and transferred by the Transferor to Brookside Dairy Limited who will carry on the said business of manufacturing and selling of manufacture of milk and milk products at the premises of Brookside Dairy Limited under the name and style of Brookside Dairy Limited (the “Transferee”) with effect from 1st November, 2013 (the “Completion Date”).The address of the Transferor is Post Office Box Number P. O. Box 85532-80100, Mombasa, Kenya. The address of the Transferee is Post Office Box Number P.O. Box 236–00232 Ruiru, Kenya. The Transferee is not assuming nor does it intend to assume any creditors or debtors of the Transferor incurred in connection with the purchase and business of the assets of the Transferor up to and including the Completion Date and the same shall be paid and discharged by the Transferor and likewise all debts and liabilities owing and due to the Transferor up to and including the Completion Date shall be received by the Transferor. Dated the 5th November, 2013. KIPKENDA & COMPANY ADVOCATES, Advocates for the Transferor. COULSON HARNEY ADVOCATES
Centum shareholders approved new investments in Liberty Beverages, Mvuke Power, Two Rivers Lifestyle Centre, Centum Share Services, Centum Asset Managers (who are buying Genesis Kenya) and the acquisition of 79% of Kilele Holdings.
Africa Media Venture (AMVF) a Dutch-based venture capital firm has raised its stake in a Kenyan restaurant guide website, EatOut, from 25% to 32% for Kshs 17 million ($200,000) in a transaction that values the online portal at Kshs. 220 million.
Lonrho is selling its entire stake (11%) in African airline Fastjet.
Crystal Ventures (owned by the Rwanda Patriotic Front) plan to sell their 20% stake in MTN Rwanda, in an IPO which will make MTN Rwanda the third company listed on the Rwanda Stock Exchange – after Bralirwa and Bank of Kigali.
Sameer Investments is buying out 41 million shares that Bridgestone owns in Sameer Africa – after which Sameer will own 159 million shares equivalent to 72% of the company.
Across the border, Tanzania’s Precision Air is looking for a government investment, just a year after an IPO which raised $7 million and reduced the shareholding of Kenya Airways from 49% to 35%
Unga Group will acquire Ennsvalley Bakery for Kshs 125M ($1.5 million) and also dispose of its shares in Bullpak.
EDIT: Kestrel Capital has arranged a $1.2 million private placement of convertible debentures in Stockport Exploration to local Kenyan qualified investors. Stockport is listed on the Toronto Stock Exchange and has mining interests in Nyanza Kenya where they are exploring along a prolific gold-hosting greenstone belt. Zeph Mbugua, the Chairman of TransCentury, became a director of Stockport in February this year.
EDIT: Swedfund, the Swedish state’s venture capital company, and The Africa Health fund through The Abraaj Group, a leading investor operating in global growth markets, made a $6.5 million investment in The Nairobi Women’s Hospital, a leading private healthcare provider for women and their families (men and children) in East Africa.

Shareholder Restructurings

Businessman Christopher Kirubi is acquiring an additional 32 million shares in Centum Investments (for ~$8.6 million) which will raise the stake he controls to about 30% and he has received an exemption from complying with the NSE requirement to make a takeover offer.
After listing at the NSE, I&M shareholders have done a swop to bring the company’s investor numbers past the 1,000 shareholder mark.
The WPP Group (through Cavendish) is increasing its shareholding in Scangroup from 33% to 50%. WPP, the largest advertising group in the world, is strengthening its control of Kenya and the East African market ahead of the merger of the two other advertising firms – Omnicom the No 2. in the world (owners of TBWA) and No. 3 – Publicis (of France) – which, when combined, will be larger than WPP.

De-Listing’s – Companies leaving the NSE

Access Kenya Group after their buyout by Dimension Data was approved by the Government
CMC is at the conclusion of a buyout offer from Dubai’s Al-Futtaim Group who are offering existing shareholders Kshs 13 a share, or about $90m.
The Dubai-based conglomerate, which holds lucrative distribution rights for Toyota and Honda in its home market, will help the struggling Nairobi-based automotive group expand its brands beyond its existing stable, which includes Volkswagen, Ford, Mazda and Suzuki.
R.E.A. Trading, which owns 56% of Rea Vipingo Plantations has offered to buy out all other shareholders at a price of Kshs 40 per share, representing a 43% premium. The shares that have since been suspended from trading and will be delisted from the NSE if the deal succeeds.

Stalled Deals

There was a Financial Times (FT) article on queues forming to buy up East African retailers but deal opportunities at Nakumatt and Naivas have been hampered by shareholder/family disputes that darken their buyout reputations and possibilities.