12 May 2019

East Africa: Abraaj Demise Shakes East Africa's Private Equity

East Africa's booming private equity industry is in dire need of rejuvenation after the collapse of deep-pocketed Dubai-based private equity fund Abraaj Group, formerly Aureos Capital, which has stunned investors and analysts in the region.

It is estimated that by the time of its demise last year, Abraaj had invested over Ksh320 billion ($3.2 billion) in 80 transactions across Africa, with an estimated $13.6 billion worth of assets under management across Africa, Middle East and South Asia.

Among Abraaj's success stories in Africa are its cornerstone investments in Liberty Star Consumer Holdings (one of South Africa's leading FMCG manufacturers), Java House (Nairobi-based East Africa's leading coffee chain), and Joint Medical Holdings (a hospital group in South Africa).

Abraaj filed for provisional liquidation in 2018 following a dispute with its investors including the Bill & Melinda Gates Foundation and the International Finance Corporation over the alleged misuse of a $1 billion healthcare fund.

Following the filing of its liquidation, Abraaj is liquidating its investments across different markets.

As a result of the turmoil, Abraaj's investors voted in favour of an international private equity firm, Actis to take charge of its operations in the Middle East and North Africa.

In October last year Actis, the British private equity firm tabled intentions to acquire Abraaj Holdings' Kenyan assets including Java House operations and a 10 per cent stake in Brookside Dairy Africa.

The takeover bid however excluded Abraaj's interests in Kenya's healthcare facilities Avenue, Nairobi Women's, Metropolitan and Ladnan Hospitals, which were acquired using funds from an independent kitty, Growth Markets Fund Health Fund.

The latter fund, whose investors include the Bill and Melinda Gates Foundation, was used to finance the acquisition of healthcare projects in Kenya, Pakistan and Niger.

According to Reuters, Abraaj's founder Arif Naqvi was arrested in Britain in April and is awaiting potential extradition to the United States where he faces charges of defrauding investors. He has maintained his innocence.

In January of this year, the Competition Authority of Kenya approved a proposal by Actis to acquire Abraaj's interest Java House.

And last week US private equity firm TPG said it had signed a definitive agreement to take over the management of Abraaj's Growth Markets Fund Health Fund, and it will be renamed Evercare Health Fund.

TPG said the healthcare fund will continue with its critical mission of providing affordable and high-quality service across Africa and South Asia.

Besides the Bill & Melinda Gates Foundation, other investors are the Overseas Private Investment Corp, IFC, CDC Group, Proparco, Philips and Medtronic.

The liquidators for Abraaj are trying to reach deals for some of the private equity funds managed by the collapsed firm.

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