KTDA, Laptrust deal in lender earns PE funds 66pc return

Customers seek services at a Family Bank branch. Norfund said it earned Sh463.4m from sale of a 5.6 per cent stake in Family Bank. File 

By VICTOR JUMA

Posted  Thursday, December 27  2012 at  12:02

The private equity firms that exited Family Bank earlier this month made a return of 66.6 per cent, underlining the lucrative returns equity funds are enjoying in the Kenyan market.

(Read: Equity firms sell Family Bank stake to KTDA, Laptrust)
Africinvest, Norways’ Norfund and Netherland’s FMO had invested Sh916 million in the mid-sized bank in October 2010, earning them a 22.4 per cent stake.

Norfund has disclosed that it earned Sh463.4 million from the sale of a 5.6 per cent stake in Family, which it acquired for Sh278 million in 2010, representing a return of 66.6 per cent that was also enjoyed by Africinvest and FMO.

“The sale gives Norfund about NOK30 million, resulting in an annual return of over 30 per cent,” Norfund said in the notice.

“Norfund invested about NOK18 million (Sh278 million), taking a share of 5.6 per cent of the company,” Norfund said in the notice. Family Bank’s chief executive Peter Munyiri said the returns linked to Norfund’s sales were equal to that of Africinvest and FMO because the entire 22.4 per cent stake was bought at the same price.

The PE funds said Tuesday last week they sold the combined stake to local authority’s pension firm Laptrust (7.3 per cent)  and Kenya Tea Development Authority (15 per cent) for Sh1.5 billion in a transaction that valued the firm at Sh6.7 billion.

The funds linked their exit to a good offer from the new owners and fear of being barred from selling part of their shares for a period once the bank lists at the Nairobi Securities Exchange (NSE).

Family Bank has announced plans to list at the NSE within two years and the capital markets regulators normally prevents major shareholders from abandoning ship or selling part of their holding within a period ranging between one and five years of going public.

Double digit returns in Kenya have seen private equity (PE) firms and development finance institutions like UK’s CDC and Germany’s DEG increase their presence in the local economy —the biggest in the region.

CDC has announced a new Sh840 million fund dubbed Progression Eastern African Microfinance Equity
Fund that will invest in microfinance institutions in Kenya, Tanzania, Rwanda, Zambia, and Uganda.

More than 10 PE funds targeting Kenya and the East African region have been formed in the past two years, in a period which development finance institutions (DFIs) have also stepped up their activities.

Some of the new East Africa-focused PE funds that have been established in the past two years include Batian Fund, Fusion African Access, Rift Valley SME Fund 1, and Catalyst Principal Partners.

The rising number of funds targeting local investments has seen founders of Kenya’s fast growing mid-sized businesses reap handsome returns when selling their stakes to the DFIs and PE firms.

Some of the companies that have sold their stakes this year include Nairobi Java House, and Reltex Tarpaulins (Africa) EPZ Ltd which manufactures tents and tarpaulins for emergency shelters.

Java, which was co-founded by Kevin Ashley and John Wagner, sold 90 per cent of its stake to Emerging Capital Partners (ECP) in what investment analysts say is one of the most lucrative sales in recent years and worth tens of millions of dollars.

Belgian fund BIO bought an undisclosed stake in Reltex for $1.3 million (Sh109 million) alongside Dutch venture capital InReturn East Africa Fund I which invested a similar amount in the firm.