StanChart eyes more private equity deals

Standard Chartered Bank’s private equity arm is scouting for more investment opportunities in the region following last week’s signing of its first major local financing deal.

The bank announced on Tuesday it had bought a minority stake in Export Trading Group (ETG), a Mauritius registered commodities trading company with Kenyan roots.

The Sh6.3 billion ($74 million) transaction saw StanChart’s private equity division acquire about 14.8 per cent shareholding of the Sh42.5 billion ($500 million) company.

“We are in discussions with quite a number of companies, there are many family owned businesses in East Africa with a high growth potential,” said director of Standard Chartered Bank’s private equity team, Ronald Tamale.

The bank’s focus is mainly on companies dealing in fast moving consumer goods and dealers in the construction sector.

A bias for deals worth a minimum of Sh1.7 billion ($20 million) has however slowed down the private equity’s business in the region.
Mr Tamale said the bank has set aside Sh255 billion ($3 billion) for private equity financing in its key business hubs of Asia, Middle East and Africa.

In Africa the private equity division has a portfolio of Sh34 billion ($400 million) with offices in Lagos and Johannesburg. The deal with ETG gives Standard Chartered a seat on the board of the 30-year old firm.

Ketan Patel, the managing director of ETG, said at least Sh850 million ($10 million) will be spent on building new storage facilities for grains in Kenya.

The firm buys maize from farmers at farm gates for onward selling to millers. It is also involved in bulk export and importation of maize beans and rice, in addition to farm inputs such as fertilisers.

The firm, which is owned by three Kenyan born partners, Ketan Patel, Mehish Patel and Pradip Patel, has operations in 24 East and southern African countries, India and China.

“In Kenya we will build our capacity to buy more maize at farm gate level,” said Mr Patel of the new capital injection.

The company has about 700 staff in Kenya, and a turnover of about Sh6 billion ($70 million).

Mr Tamale said another key attribute StanChart was looking for is strong management teams in firms that they invest in.

The ETG acquisition could accelerate its listing at the stock exchange.

“Our aspiration, which is shared by ETG as well, is to eventually list the company,” said Mr Tamale.

Private equity investors ordinarily prefer exiting through stock exchanges to realise best value for their investment.
Last week Citi Group also said it was turning more focus on Africa to accelerate its growth.

“The region is at a tipping point and Citicorp is ready to provide the required arteries for this growth,” said Elias Panayotopoulos Citibank‘s global transaction services co-head for Central and Eastern Europe, Middle East and Africa.