KENYA – Amethis Fund II, Paris-based private equity fund is set to acquire a minority equity stake in Kenyan retail chain Naivas Limited in a deal estimated to be worth billions of shilling.
“We are very excited about this partnership. As we embark on our next phase of growth, having an experienced investor with us will further strengthen the business,” Naivas’ managing director David Kimani said in a statement.
“Amethis has a strong track record investing across Africa including Kenya, which will add value to our operations.”
Naivas, which has 60 branches across the country said it will use Amethis experience and expertise to further expand its reach.
The retailer announced the signing of the agreement while stating that the parties were awaiting necessary regulatory approval to proceed with the transaction.
It is not clear how much Amethis is set to inject into Naivas and get in return but historical data shows that the fund typically invests between Sh1.1 billion (US$10m) and Sh4.4 billion (US$43m) or more in target firms for about 30 percent of stake .
“In a Kenyan retail landscape where many competitors from abroad are settling in, we are proud to support a very successful Kenyan business that has a strong understanding of the Kenyan consumer,” Jean-Sebastien Bergasse, a partner at Amethis, said in the statement.
“We look forward to working jointly with the shareholders and management team to further expand the business’ operations and store network, while retaining a strong Kenyan identity.”
The investment follows the fund manager’s 2017 announcement when it sought Sh36 billion (US$356) for investment in 11 countries including Kenya through Amethis Fund II investment vehicle.
Amethis announced the final close of the Pan-African fund in July last year after raising Sh42 billion (US$415m), which was Sh6 billion (US$59m) above the set target.
“Amethis Fund II follows the same investment strategy as Amethis Fund I by providing growth capital to African mid-cap champions, through investments with an average ticket size of EUR 10-40m (US$11m-44m), or more through co-investment,” said Amethis after the close of the fund.
“Amethis will continue being an active shareholder, supporting entrepreneurs by giving them access to Amethis’ international network and external growth opportunities, while improving their efficiency and governance.”
The Amethis fund II is a 10-year closed-end generalist private equity fund targeting mid-market companies in financial institutions, fast-moving consumer goods, healthcare, agribusiness, education, IT and telecommunications.
Amethis’ pursuit of a minority stake in Naivas follows its earlier investments in Kenya through its Fund 1 including; printing and packaging firm Ramco Plexus in 2014, Confectionery Company KenAfric in 2016 and Chase Bank Kenya in 2013.
Amethis international expertise and experience has the potential to boost Naivas supermarket’s performance in an industry that has recently seen the entry of global brands like the French giant retailer, Carrefour as well as South Africa’s Game and Shoprite supermarkets, which are all backed financially by their parent firms.
The deal also comes months after Quickmart and Tumaini merged following their acquisition by Sokoni Retail Kenya, a special purpose vehicle controlled by private equity firm Adenia Partners.
Its capital injection into Naivas will additionally enhance the retailer’s financial muscle necessary in accelerating the supermarket’s expansion plans in major towns across the country.
The retailer, who is implementing the food market idea in partnership with a local interior design firm Renova Limited, is preparing to officially launch the latest fresh food stores over the next few weeks.
The fresh food concept is a design strategy that allocates more space to fresh food categories and involves clever displays and sometimes supermarket architecture overhauls, to accommodate inventories that match evolving customer needs and improve customer experience.
The success of the transaction is set to further boost Kenya’s investment profile.
A 2019 report indicated that Kenya continued to attract more private equity investments with the country taking the lion’s share of capital committed to East Africa ahead of Uganda and Ethiopia.
According to the report, which tracked PE investments, Kenya accounted for 87 percent of the total US$1.4 billion investments made in the region in 2017 and 2018.
Deal volumes in Kenya in the review period stood at 61, accounting for 73 percent of total transactions.