Markets & Finance

Helios earns record profit in timely Equity stake sale

eqty

An Equity Bank branch in Nairobi. PHOTO | FILE

Helios Investment Partners’ sale of 24.99 per cent stake in Equity Holdings this year saw the private equity (PE) firm make one of the biggest profits in an equity investment in Kenya, right in the middle of the worst market run since 2011.

Helios returned big gains partly due to its seven-year investment horizon which meant it was able to capitalise on Equity’s share price appreciation since 2007. This allowed the firm to beat the market easily in terms of returns this year.

According to disclosures made by Equity chief executive officer James Mwangi, Helios sold its stake at $500 million (Sh51 billion), thus earning a nominal capital gain of Sh40 billion on the Sh11 billion it paid in December 2007 to acquire the stake.

The PE firm also collected dividends totalling Sh6.5 billion from Equity, taking its total return on the investment to 422 per cent or 23 per cent compounded annually.

Helios’ timing of the sale was also remarkable given that the share price of the bank has fallen by 16.7 per cent to Sh40 since the sale was concluded.

“Majority of these shareholders paid a 10 per cent premium on the market price. The highest was nearly Sh52 per share,” said Mr Mwangi, referring to the share’s prevailing market price of Sh48 at the time of Helios’ sale. He also termed the exit as a record for sub-Saharan Africa.

READ: Helios holds on to Sh1.3bn Equity shares

Helios sold its Equity shares to fellow UK fund Genesis Investment LLP (5.4 per cent), NSSF Uganda (2.44 per cent) and Norfund & NorFinance (12.2 per cent), with undisclosed stakes bought by Investec, NSSF Kenya, African Alliance, Renaissance Capital and other investors.

Regulatory filings for October however showed that Helios still held 32.7 million shares in Equity, indicating either a new investment in the bank or a retention of part of the previous holding.

While Helios was carting away its record gains, other investors into the stock market had less to celebrate.

The benchmark NSE 20 share index was on a sustained decline after hitting a near seven-year high at the end of February. The index is now set to end the year about 22 per cent lower than it opened, while the NSE All share index is looking at a decline of 12 per cent.

Investor wealth (market capitalisation) has gone down by Sh263 billion to Sh2.01 trillion this year.

Helios has however been ploughing back a sizeable amount of its gains back into the Kenyan economy. It started the year with a generous cash pot with which to ramp up its investments in Kenya and other African countries after raising a record $1.1 billion (Sh100 billion) for its Helios III fund that closed in January.

Helios in May took a 12.4 per cent stake worth Sh10 billion ($100 million) in explorer Africa Oil Corporation. The investment is meant to boost Africa Oil’s capital for drilling work in northern Kenya.

The PE fund is also buying a majority 70 per cent stake in Telkom Kenya currently held by French multinational France Telecom. The other 30 per cent shares of Telkom Kenya is owned by the Treasury.

France Telecom had bought a 51 per cent stake in Telkom Kenya for $390 million (Sh39 billion) in 2007, but loan conversions have since raised the stake to 70 per cent. Other than the purchase of the stake which could be worth several billions, Helios is expected to spend much more in investments into the Telco trying to turn a profit.

In November, Helios entered into a joint venture with property developer Acorn Group. While the size of the investment was undisclosed, the deal was described as a 50-50 joint partnership which will also see the PE firm help Acorn raise funds for real estate.

Helios also holds stakes in technology firm Wananchi Group, Vivo Energy, and cut-flower producer Flamingo Holdings.

Across Africa, the firm has made investments in Nigeria, Ghana, Tanzania, Angola, South Africa and Morocco. It invests between $30 million (Sh3 billion) and $200 million (Sh20 billion) in each company.

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