German firm buys 25 p.c stake in Resolution Health

Resolution Health East Africa has sold a 25.1 per cent stake to a German investor for Sh184 million, funds the firm said will be used to expand to Rwanda, Uganda, and Burundi.

The medical insurer raised the cash after selling new additional shares created to accommodate private equity firm African Development Corporation (ADC).

“The money will be used to strengthen our core capital as we expand to new markets,” said Mr Peter Nduati, the CEO.

The company with a core capital of Sh40 million, is expected to boost its funds to Sh224 million after the new cash is reflected in the balance sheet.

ADC will take up three out of the seven seats at Resolution Health’s boardroom.

The deal comes at a time when foreign equity funds have stepped up their investments in Kenya in the past one year.

Interest in Kenya

British CDC, FMO of Netherlands, Africinvest, Leapfrog, Soros Funds Management, Flagstone Reinsurance, KfW of Germany, and France’s Proparco are some of the foreign private equity and sovereign funds that have invested in Kenya.

The equity funds are looking to spend over Sh3 billion in the country this year.

The investors see Kenya’s economy growing fast, gaining from its transport and financial services hub status in the East African market.

The economy is expected to record a growth rate of at least five per cent in 2010 compared to 2.6 per cent a year earlier, pushed by a strong performance of the mainstay agriculture, tourism, and financial services sectors.

“We are looking for more opportunities in the banking and insurance sector,” said Dirk Harbecke, the chief executive of the Frankfurt-based ADC.

“We are excited about the Kenyan market because it has diverse economic sectors that are growing fast. Kenya is also well placed in the East African Community and this fits in well with our experience in the European Union,” he said.

ADC recently set up an insurance arm to make investments in Sub-Saharan Africa’s insurance market where penetration is low.