2024 Annual - (released February 2025)
SA's quarterly Private Equity & Venture Capital magazine
2024 PRIVATE EQUITY DEAL OF THE YEAR
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Catalyst magazine has always prided itself on recognising excellence in the South African private equity industry, and we are, once again, delighted to present a curated showcase of shortlisted candidates for the prestigious Private Equity Deal of the Year Award 2024.
Exit by Pan African Infrastructure Development Fund of assets to Harith InfraCo
Harith Infraco, the first transformed, long-term infrastructure platform in South Africa, successfully acquired PAIDF’s shareholding in key quality continental energy, digital infrastructure and aviation assets across six sub-Saharan African countries. The assets include, among other African assets, a 37.92% stake in UK-domiciled energy firm Anergi, which owns leading energy assets in Africa; a 15.3% holding in Remgro’s Community Investment Venture Holdings (CIVH) – a prominent operator of digital infrastructure assets in South Africa, controlling brands such as Vumatel and Dark Fibre Africa – and a 37.5% stake in the second largest private airport in Gauteng, Lanseria International Airport.
New equity partners Zungu Investments and Mergence Investment Managers joined the Development Bank of Southern Africa (DBSA) and The Government Employees Pension Fund (GEPF), who remained invested in the assets managed by Harith General Partners. The deal also marked Harith’s transition from fund manager to direct stakeholder.
The challenge for the parties was – in a suboptimal macro-economic environment, post a global pan-demic, with rising inflation and high interest rates – to accommodate those longstanding investors who wished to exit within the originally agreed fund life, as well as those who wished to remain invested and to maximise value. The assets were acquired at an attractive entry multiple for the new investors, while resulting in significant returns for exiting PAIDF investors.
The deal was complex, with the establishment of Harith InfraCo encompassing assets located across several sub-Saharan jurisdictions. A debt funding process had to be followed and, in addition, the transaction involved the conversion from a private equity structure to a permanent capital structure which was more suited for infrastructure investment, while at the same time considering that the GEPF and DBSA would remain invested. The large number of parties involved in the transaction – each with differing interests – complicated negotiations, which spanned over 18 months.
“By enabling liquidity and a successful exit for PAIDF I’s investors at fair multiples, the transaction realised the full value of the assets while strategically retaining these critical investments within Harith’s portfolio. This ensured continuity in their contribution to socio-economic development, infrastructure sustainability and regional integration” (Sipho Makhubela: CEO Harith General Partners).
For Harith InfraCo, the deal positions it as one of the powerhouses in the African infrastructure investment landscape and the trans-action can be considered a win for all stakeholders involved.
The R6,5bn acquisition by newly established Harith InfraCo marked the conclusion of Pan African Infrastructure Development Fund I (PAIDF), Africa’s first 15-year tenure infrastructure fund.
PAIDF was established as a vesting trust under South African law in 2007, with the primary goal of investing in private equity stakes across diverse critical infrastructure sectors throughout Africa, such as power and energy, telecommunications, transport, water and sanitation. PAIDF I commenced operations in September 2007, with commitments totalling US$625m from nine investors. A tenth investor joined following its second close in 2009, with total commitments increasing to $630m. The life of the fund was extended by two additional one-year periods.
​Local Advisers:PSG Capital, White & Case (SA), KPMG, Nolands Capital, Standard Bank (debt funding).
Comment from the Independent Panel: This was a complex transaction, creating a permanent capital vehicle which will create capacity for further, much-needed infrastructure investment in the region. Managing the many stakeholders in this transaction and achieving great results for exiting investors, while creating a platform for new and existing investors, differentiated this transaction.
PICK OF THE BEST (in no particular order)
Actis Africa’s acquisition of Swiftnet from Telkom
The R6,7bn acquisition by Actis – a global investor in sustainable infrastructure – of a 70% stake in Swiftnet, alongside Royal Bafokeng (30%) as its empowerment partner, represents one of the largest deals in the telco sector in 2024.
Swiftnet, one of the largest owners, operators and developers of mast and tower infrastructure in South Africa, represents a strategic acquisition for Actis, with approximately 4,000 sites across South Africa. The deal, which was announced in March 2024, aligns with its goals of sustainable growth and infrastructure development while providing a solid foundation for future expansion in the telecommunications sector. The platform is underpinned by a strong relationship with Telkom and other existing anchor tenants, and long-term contractual revenue.
The disposal by Telkom was in line with global trends for mobile network operators to divest of their tower portfolios. For Telkom, the deal enabled it to de-gear its balance sheet and formed part of its value unlock strategy for shareholders, selling an asset that contributed c.9% of its EBITDA for c.40% of its market capitalisation. Beyond the financial implications, the deal ensured a seamless continuity for Telkom’s related businesses, particularly Telkom Consumer and Openserve, by guaranteeing continued access to Swiftnet’s infrastructure under mutually beneficial terms. The additional capital will give Telkom the flexibility to focus its investment in next-generation technology infrastructure.
The transaction was complex on a number of levels. Telkom first started exploring the value unlock strategy in 2020, requiring engagement with multiple stakeholders. Comprehensive due diligence processes were undertaken, and complex legal negotiations involved not only the transaction agreements, but also key supplier/customer contracts held by Swiftnet. In addition, the transaction required the approval of the competition authorities and the independent Communications Authority of South Africa and, as a category one transaction for Telkom (a disposal exceeding 30% of market capitalisation), the approval of shareholders – with majority share-holders being the South African government and the Public Investment Corporation, which required extensive stakeholder engagement. The nature of the buyers consortium required the alignment of a number of sophisticated equity partners, which included obtaining the support of the various governance and approval structures of these equity providers.
Swiftnet has significant growth potential going forward, given South Africa’s rapidly growing data demands, and the furthering of telco infrastructure a critical element in the development of South Africa as a whole. The deal allows Actis to invest in this growing sector, with strong secular tailwinds and an increasing need for tower densification driven by increasing internet penetration and the transitions from 3G and 4G to 5G.
Local Advisers: Rothschild & Co, Rand Merchant Bank, Itai Capital, Nedbank CIB, Bowmans, Webber Wentzel, Baker McKenzie South Africa, PwC, SNG Grant Thornton and EY.
Comment from the Independent Panel:
A major transaction in the telco industry, this deal unlocked value for Telkom shareholders.
Actis’ exit of Octotel and RSAWeb to AIIM and consortium partners
In 2020, Actis acquired a controlling interest in Octotel – a South African fibre-to-home operator (FTTH) – from Pembani Remgro and other shareholders for an enterprise value of c.R2,3bn. At the same time, the infrastructure investment fund signed agreements to acquire a non-controlling interest in RSAWeb, a leading internet service provider. In March 2024, Actis disposed of 100% of Octotel and its 45% stake in RSAWeb (for an undisclosed price) to a special purpose vehicle held by a consortium comprising African Infrastructure Investment Managers (AIIM) through its IDEAS Infrastructure Fund II Partnership, Thebe Investment Corporation, and French impact investor STOA.
A key player in the FTTH and FTTB markets, Octotel’s open access fibre network passes c. 350,000
homes and caters to over 110,000 homes and businesses in the Western Cape, up from 195,000 and 56,000 respectively when Actis first acquired the platform. The company’s rapid expansion and the increasing demand for high-speed internet in South Africa reflect the growing importance of digital connectivity for both personal and professional use.
The exit by Actis resulted in significant returns for its investors over a short investment period. “Octotel has proved to be an excellent investment for Actis … we have been able to scale the platform and generate significant returns for our investors while driving positive social impact” (David Cooke: Partner Actis). Octotel has provided free 1 GB internet connections to more than 150 schools in the Western Cape, converted its fleet of vehicles to LPG hybrid vehicles to decar-bonise transportation, and secured one of the first social loans in South Africa, in recognition of the company’s work to promote digital inclusion.
The transaction brings much-needed foreign currency into the country through STOA, while at the same time introducing a black economic empowerment component not previously present. With this transaction, the consortium has committed to support the network expansion of the company, as well as supporting its expansion into new segments, so that Octotel can remain a key player in South Africa’s digital infra-structure development.
In line with the seller’s exit strategy, the transaction was run according to tight deadlines. The process commenced in November 2023, and the deal, inclusive of regulatory approvals, was closed in September 2024.
Local Advisers:
: Webber Wentzel, Bowmans, ENS, Deloitte and Rand Merchant Bank (debt funding).
Comment from the Independent Panel:
A foreign and BEE investment combining to acquire an asset in a fast-growing industry segment.
Exit by Old Mutual Private Equity of its investment in Chill Beverages and Inhle Beverages
Old Mutual Private Equity (OMPE) took control of the beverage businesses in June 2022, when it acquired and delisted Long4Life via a leveraged-buyout transaction.
The exit of this investment from the OMPE Fund V to a consortium led by Alterra Capital Partners, and including Mineworkers Investment Company and Admaius Capital Partners, represented an opportunity to position the businesses for the next phase of growth and return capital to its investors. The acquisition marked the first investment by Alterra’s Africa Accelerator Fund.
South Africa’s beverage industry is undergoing a transformation, driven by innovation, changing consumer preferences and a commitment to sustainability. The shift marks a departure from the traditional beverages towards a more dynamic and forward-thinking market.
Under OMPE’s stewardship, Chill and Inhle Beverages has become a fully integrated beverages platform in the fast-growing beverage segment, through its diverse range of Score energy drinks, Fitch & Leedes premium mixers, and Chateau Del Rei – a canned perlé sparkling wine. It has manufacturing facilities in Heidelberg (Gauteng) and Stellenbosch (Western Cape), using excess capacity to co-pack for other multinational companies in the energy drinks and alcoholic beverages industry. Since OMPE’s acquisition, the company has more than doubled, enjoying significant growth, not only in the integration of the business for greater efficiency, but also in terms of geographic expansion within South Africa.
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The transaction marks the most significant exit to date in Old Mutual Private Equity Fund V, following the Fund’s previous exits of Sorbet (sold to Clicks), LimeLight and Clayton Care in its Personal Care & Wellness cluster. For OMPE, “the vision we share in our partnership with the Company’s management team has led to an extraordinary blend of growth and transformation for the business, culminating in great success. We believe that Chill & Inhle Beverages is well positioned for the future” (Chumani Kula: Co-Head of OMPE).
For the consortium, the transaction represented an attractive opportunity to deploy capital, acquire a leading player with strong growth underpin, and enter the fast-growing energy drink and beverage market. The consortium will support Chill through the provision of additional marketing spend on its brands, increasing the focus on developing a wider distribution network, and investing in new product development to extend its production range.
The transaction closed on 14 October 2024.
Local Advisers:
Local Advisers: Standard Bank, Rand Merchant Bank, Nedbank CIB, Webber Wentzel, Cliffe Dekker Hofmeyr, ENS and EY.
Comment from the Independent Panel:
The deal represents a maiden investment by Alterra in their Africa Accelerator Fund.
Criteria used for the selection of the shortlist for Private Equity Deal of the Year:​
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An asset with good private equity characteristics: a cashflow generative business and able to service an appropriate level of debt; a business model that is resilient to competitor action and downturns in the economic cycle; a strong management team that is well aligned with shareholders and capable of managing a private equity balance sheet; predictable capex requirements that can be appropriately funded.
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Deal size is a factor to filter deals, but plays a limited role for acquisitions. It does carry more weight for disposals.
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Potential / actual value creation – was the asset acquired at an attractive multiple? If the deal is a disposal, was it sold at an attractive price? What is the estimated times money back and / or internal rate of return?
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There is limited information available in the public domain on private equity deals, and even somewhat educated guess work doesn’t provide all answers in all instances.
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This is the 20th year in which the Private Equity Deal of the Year has been awarded. Nominations were received from advisory firms and judged by the Independent Panel, consisting of Nicky Newton-King, Phuthi Mahanyele-Dabengwa and James Formby.