Saturday, October 11, 2008

Mauritius private equity fund eyes African opportunities

MAURITIUS-domiciled Aureos Capital, a private equity fund manager, says its new fund, which raised $253,5m last month, seeks to tap “superior risk-adjusted returns” in Africa.

Aureos Capital said SA was one of the three main areas targeted by the Aureos Africa Fund, which invests in medium-sized businesses seeking expansion capital, management buy-outs, replacement capital or even private investment in public equity.

Davinder Sikand, regional managing partner of the fund, said last week the group had already approved more than $50m for six investments in financial services, information and communication technology, fast moving consumer goods, building products, and real estate development.

“Given the strong pipeline across the continent, we expect to have invested or committed between $80m and $100m by the end of the year,” he said. Sikand said the fund’s portfolio would be diversified across sectors, countries and transaction types, focusing where Aureos could see potential to achieve above-average growth via regional expansion.

“We are seeing unprecedented economic growth and foreign direct investment in Africa, which is providing a vibrant economic platform for achieving superior risk-adjusted returns in private equity investments,” said Sev Vettivetpillai, CEO of UK-based Aureos Advisers, which advises Aureos Capital.

“Trade barriers are coming down, and our Africa fund seeks to tap into these new developments. For example, there are free trade areas in east Africa, southern Africa and west Africa.

“We believe it is only a matter of time before a pan-African free trade area is formed,” Vettivetpillai said.

The new fund sought to make initial investments of up to $10m in medium-sized companies with the potential to expand to pan-African businesses within two to three years via “buy and build” strategies or through organic growth, Aureos Capital said.

Sikand said these businesses were becoming key players in domestic demand and supply chains, making them well-placed to achieve critical mass and pursue regional growth strategies.

“We believe that our experience with investing in mid-sized businesses in Africa makes us particularly well-placed in the region,” said Sikand.

“Recent disposals of Uganda Microfinance and Shely’s Pharmaceuticals from our first generation of Africa funds clearly demonstrate Aureos’s ability to crystallise value for its investors and other stakeholders,” said Vettivetpillai.

Aureos’s first generation regional funds in east, west and southern Africa invested $140m in 34 companies.