ROCKWOOD Private Equity, the South African buyout company that used to be part of Barclays’s Absa unit, is seeking to raise as much as $500m for a new fund that will build on the investor’s strategy.
"It will be a generalist fund investing primarily in South African industrial and service companies with leveraged buyouts," managing partner Andrew Dewar said on Monday. "The country is rich with private-equity opportunities."
Private equity firms amassed $4.3bn last year for investing in Africa, the most in six years, attracted by potentially high-growth businesses. Rockwood’s first fund had an internal rate of return of more than 30% after it raised R6.2bn by 2006, Dewar said. The investor-appointed London-based FirstPoint Equity Partnership is to lead fundraising for the new money pool later this year, he said.
Barclays Africa sold its 73% stake in Absa Capital Private Equityin 2013 for R2.7bn. Rockwood’s companies had almost doubled total annual aggregate earnings to R1.8bn last year from about R1bn when the firm started on its own, Mr Dewar said.
The company was considering selling assets in the next 18-24 months because there was a lot of available capital in the private equity market and a foreign buyer might be attracted after the rand fell 28% against the dollar in the past year, Mr Dewar said.
Mr Dewar told Bloomberg last month that SA was no longer the destination of choice for private equity investors seeking to tap returns on the continent.
Buyout firms are increasingly targeting markets such as Kenya and Nigeria, where expansion this year is forecast by the International Monetary Fund to be more than double that of SA. "Almost all the growth is outside SA’s borders," he said.
"The shift from SA to the rest of Africa also means the way exits happen will change. You could use listings in London if you get to scale in Africa."
Tsebo Outsourcing Group, controlled by Rockwood, has expanded from SA into Namibia and Botswana, and in 2013, won its first pan-African contact from Barclays to manage 2,000 sites across 12 countries.
EnviroServ Holdings, Rockwood’s waste-management company, has expanded into 15 countries outside SA. As much as $50bn allocated to private equity in Africa has yet to be invested, according to the Southern African Venture Capital and Private Equity Association. Rockwood’s Tsebo may tap into that cash as the firm prepares to sell its investment by year-end. There had been as many as 40 approaches for Tsebo, many from other buyout companies, Mr Dewar said last month.
A share sale for EnviroServ "would be better on London’s AIM than on the JSE", Mr Dewar said.