PE funds pump Sh100 billion into Kenyan deals

Money Markets

UAP-Old Mutual Kenya Group CEO Peter Mwangi. Helios and Old Mutual deals were among the most notable this year. PHOTO | FILE 

By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com

In Summary

• Private equity (PE) firms have been involved in 18 local deals this year worth at least $953 million (Sh100 billion) in declared value.

Private equity (PE) firms have invested nearly $1 billion (Sh105 billion) into Kenyan businesses in the first eight months of the year, with financial services attracting the most cash.

Data on investments compiled by Burbidge Capital shows that the PE firms have been involved in 18 local deals this year worth at least $953 million (Sh100 billion) in declared value.

According to Burbidge, the largest deals year-to-date have involved the purchase of Helios partners’ stake in Equity Bank by Norwegian funds Norfund and NorFinance AS for Sh23 billion and Old Mutual’s Sh23 billion purchase of a 60.7 per cent stake in UAP Holdings from businessman Chris Kirubi, Centum and PE firms Abraaj Group, AfricInvest and Swedfund.

The financial services sector has emerged as the preferred investment destination for many private equity firms attracted by high returns.

“Favourable demographic dynamics, stable macroeconomic fundamentals, technology-driven products, increase in disposable income and structural gaps in supply and demand have created attractive investment opportunities in the financial services sector,” said Burbidge in the report.

Helios paid Sh11 billion for the 24.9 per cent stake inequity in 2007, and on its exit this year had made a return on investment of about 300 per cent.

READ: PE Helios rakes in Sh52bn from Equity stake sale

The declared inward investment flows from the private equity firms have shown a remarkable increase compared to the first eight months of last year, when the declared value of investments stood at $150.6 million.

Last year had, however, seen a sizeable number of investments whose value was not declared. Kenya has accounted for the lion’s share of deals in eastern Africa, taking 18 out of 25 PE deals which were valued at $1.07 billion.

Investors have particularly been alerted to the high potential of Kenya’s insurance sector, which is seen as having a good upside due to the low insurance penetration in the country.

Global credit ratings agency Fitch said in a report released last week that Kenya’s insurance sector has matured compared to other African economies with comparatively higher reporting standards, adding that local companies can also give foreign investors crucial access to regional markets.

“Some insurers such as Britam, UAP and Jubilee have footprints across the greater east African region which enhances their attraction to investors,” said Fitch.

July was the most active month for private equity firms in Kenya with four deals concluded.

Other than the Helios and Old Mutual deals, notable transactions this year included a $100 million (Sh10.5 billion) investment partnership deal between real-estate firm AMS Properties, Hass Consult and Mauritian PE firm Xterra Capital Advisors to develop residential, commercial and hotel units across East Africa.

Chinese firm Aviation Industry Corporation of China (Avic) also invested $70 million (Sh7.4 billion) in Centum’s Two Rivers development, for a 38.9 per cent stake.