Ethos Private Equity group will sell more assets in the next three years, after years of consolidating and growing its operations.
The company, which has a portfolio of companies in sectors such as technology, finance, media and industrials, has sold several investments in the past few weeks and teamed up with African Rainbow Capital in a R1.5bn buyout of fintech group Crossfin.
“In the next 36 months, we will be disposing of more assets,” said CEO Stuart McKenzie. He did not say which businesses are likely to be sold.
Ethos, which is a part of JSE-listed investment group Ethos Capital Partners, has investments in companies such as digital bank TymeBank, cellphone tower management company Eaton Towers, car parts retailer AutoZone, tissue-maker Twinsaver and in investment company Brait.
In the past week, Ethos sold packaging company Neopak to local black-owned company Corruseal, and glassmaker Consol, which is owned via Brait, will be sold to Ireland-based Ardagh, a global supplier of glass and metal packaging, for R10.1bn.
McKenzie said that despite the tough operating period brought on by the pandemic, “we have been pleased to be able to sell quite a few businesses, and also the calibre of buyers that we attracted signals an interesting change where we are starting to see strategic and institutional investors taking a long-term view on [local] assets”.
The total aggregate value of the recent disposals — Consol, Neopak and logistics company J&J, together with the capital raised in the initial public offering of tower business IHS, which listed on the New York Stock Exchange in October — was $1.4bn (R22.5bn).
“This is the biggest we have seen in quite a long time and the acquisitions and capital raises [Crossfin, Grit Real Estate, TymeBank and Brait] represent close to $500m of investment,” McKenzie said.
“We haven't seen this level of interest and activity in the last three to five years. This signals that we are reaching an inflection point about African businesses can demonstrate good management and growth [and] are becoming global players.”
“The key message is it feels like we are open for business again after a long period of time when it was difficult to make deals.”
Ethos manages funds that invest in a variety of companies, from small to medium-sized entities to well-established businesses.
McKenzie said private equity companies play a crucial role to attract in attracting capital to markets through initially investing in businesses with growth potential. They also have the ability to implement sound governance, turning companies into highly investable entities down the line, he said. “The right businesses will attract buyers.”
In addition to the recent disposals and acquisition, Ethos and investment manager Ninety One entered into an advisory contract for Ninety One’s Africa Private Equity funds. Brait has also recently announced a convertible bonds and rights issue.
Without providing details on which sectors the company was eyeing, McKenzie said Ethos was focusing on sectors that “we think have strong revenue profiles that we can support going forward”.
Asked if the company will open a new fund, McKenzie said the group is always looking at new funding opportunities but “at the moment we are in the a phase of value creation. We do have plans but not in the near term.”
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