Fusion Capital, a private equity and fund management firm, has injected Sh245 million into GAL Baking Services Limited for its branch network expansion.
Fusion invested the money in the firm through both debt and equity and in turn get a 45 per cent stake in the family-owned bakery.
GAL said that money would go towards modernising its Nairobi-based bakery and increase its outlets to 15 from the current 3.
“We are excited that we have Fusion as a partner over the years. Fusion first partnered with us when we had just the production plant and one retail outlet. We are now modernising the bakery and plan to open additional outlets. We are working towards growing our market share with a long term goal of listing on the Growth Enterprise Market Segment,” said John Murerwa, a director at GAL.
GAL was started in 2005 by John and Jacqueline Murerwa and specialises in baking cakes, cookies, pies, croissants and other pastries.
Fusion is making its second investment in the bakery.
“We are excited to have partnered with GAL Baking Services Limited. Our partnership dates back to 2008 when we made our first investment and it is great to be a part of the growth that GAL Baking has experienced,” said Fusion group chief executive Luke Kinoti.
Fusion said it estimates that the pastry business would have an annual turnover of Sh2 billion.
Demand for cakes, biscuits, cookies and other wheat products has been increasing over the years in tandem with the change in consumer preferences.
This has caught the attention of large retailers such as Uchumi, Tuskys and Naivas who have set up bakeries in their outlets.
Listed firm Unga Group also seeks to re-enter the baking business with the planned buyout of Ennsvaley Bakery. Unga Group plans a comeback after it exited the baking business through the sale of Elliot Bakeries 15 years ago.
Kenyans consume close to one million tonnes of wheat every year most of which is imported.
Kenya produces 350,000 bags of wheat annually against a demand of 900,000 bags and this deficit is covered through imports.
Fusion Capital funds small and mid-size enterprises within the East African region that require capital injections of between $25,000 (Sh21.6 million) and $25 million (Sh2.16 billion).
The private equity and fund manager has also invested in catering firm San Valencia, Nakuru-based Grand Park Estates, Zetech College and Ushindi Feeds.
Regionally, it invests heavily in commercial and retail office projects through its Sh8.6 billion ($100 million) African Real Estate Fund earmarked for Tanzania, Rwanda, Uganda and Kenya.