Ascent Capital Seeks $120 Million for East Africa Businesses

(Bloomberg) -- Ascent Capital Africa plans to raise $120 million for its second fund that will invest in mid-sized companies across East Africa, where domestic demand is expanding.

The private-equity firm is the latest to tap into surging investor interest in the region. Centum Investment Co., Kenya’s second-biggest publicly traded investment company, is planning to raise 50 billion shillings ($487 million) for its second fund, while closely held Catalyst Principal Partners last month raised $155 million.

Ascent, based in Nairobi, plans to woo Kenyan pension funds and businesses that invested in its inaugural $80 million fund, co-founder Lucas Kranck said Monday in a phone interview from the Kenyan capital, Nairobi. The European Investment Bank is considering investing $25 million in the fund, he said.

“We have started speaking with development-finance institutions because they need time to do due diligence and make decisions,” Kranck said. “We also hope to get more Kenyan institutional money into the fund.”

Ascent’s new fund, christened the Ascent Rift Valley Fund II, will be based in Mauritius and targets raising as much as $90 million in the first round, which is expected to close in the third quarter of 2019. The final target is expected to be achieved 12 months after the first close, he said.

EIB Decision

The EIB’s management committee will make a decision on its potential investment early next year, a spokesman for the Luxembourg-based lender said Wednesday by email.

The value of private-equity deals in East Africa surged to $482.1 million in the eight months through August, compared with just $19 million a year earlier, according to I&M Burbidge Capital Ltd., a Kenyan financial-advisory group.

The ARVF II fund, which is seeking a 20 percent internal rate of return, is banking on its team’s “deep local knowledge” to attract investors, Kranck said. He’s worked in East Africa for more than a decade, serving as regional general manager for Nokia Solutions & Networks Oy. David Owino, another co-founder, was previously director of private equity at Centum.

Ascent plans to make new investments in fast-moving consumer goods, health-care, manufacturing and financial-services companies in Tanzania and Rwanda, adding to Kenya, Uganda and Ethiopia, which were covered under the first fund, Kranck said.

Minimum Stake

“These are markets we know, and it’s good to deal with markets we know well,” he said.

The proposed fund will target deals of $3 million to $15 million, taking either a majority stake or minority shareholding of at least 25 percent in companies it invests in, Kranck said.

A growing population, rising consumer demand among the middle class and access to larger regional markets through Africa’s larger cities and regional hubs is attracting growing amounts of foreign direct investment to the continent, according to the African Development Bank.

Ascent has so far invested $42 million from its first fund in eight companies including two in health-care, four manufacturing businesses, one mobile-money agent and a retail distributor, Kranck said.

The current investments include Medpharm Holdings Africa Ltd., a laboratory services provider in Ethiopia, Ugandan mobile-money agent Chims Africa Ltd., vehicle parts maker Auto Springs East Africa Plc, and Kisumu Concrete Products, a construction materials producer in Kenya.

Others are Universal Plastics Factory Plc and Allied Chemicals Plc in Ethiopia, African Queen Uganda Holdings Ltd., a retail distributor of fast-moving consumer goods, and Guardian Healthcare Ltd., a Ugandan retail pharmacy chain.

The private-equity firm plans to invest the balance of the funds by the second quarter of 2019 and exit from one or two investments over the next 12 months, Kranck said.

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