Capital Markets

JP Morgan-linked firm triples cash in Africert deal

jpmorgan

Wanjohi Ndagu, a partner at PCP. The firm exited Africert after six years. FILE

Summary

  • PCP said Tuesday it has sold its 36 per cent stake in Africert to a local investment firm, completing its exit from the company.
  • PCP is an investment firm based in Uganda and registered in Mauritius.
  • It counts US-based international bank JP Morgan Chase & Co, Bill and Melinda Gates Foundation, the Rockefeller Foundation, the United States Agency for International Development (USAID) and Kilimo Trust as some of its investors.

A JP Morgan-linked private equity firm, Pearl Capital Partners (PCP), has exited its investment in a Kenyan agricultural firm in a deal that saw it triple its investment in six years.

PCP said Tuesday it has sold its 36 per cent stake in Africert to a local investment firm, completing its exit from the company.

Africert deals in inspection, accreditation and certification of vegetables, fruits and cash crops such as coffee, tea, cocoa and cut flowers.

PCP’s investment in Africert comprised of an equity stake bought at $35,000 in 2006, a six-year $85,000 loan charged at 8.5 per cent per annum and an additional equity investment in 2009 through a rights issue.

Overall, PCP’s investment was worth about $150,000 which has grown threefold since 2006 to approximately $450,000 or Sh39 million at today’s exchange rate.

“The blended return for the whole investment is about three times,” Wanjohi Ndagu, a partner at PCP, told the Business Daily.

PCP is an investment firm based in Uganda and registered in Mauritius.

It counts US-based international bank JP Morgan Chase & Co, Bill and Melinda Gates Foundation, the Rockefeller Foundation, the United States Agency for International Development (USAID) and Kilimo Trust as some of its investors.

Mr Ndagu declined to reveal the name of buyer or transaction price citing non-disclosure agreements signed as part of the deal.

He, however, said the biggest return was from the equity investment component.

“Six years on, our belief in the business has been rewarded by an exit to a trade buyer at a multiple of four times our original investment and an internal rate of return in excess of 30 per cent,” said Mr Ndagu in a statement.

The current valuation of PCP’s investment in Africert means the 36 per cent equity stake purchased in 2006 for $35,000 has increased to about $140,000 (Sh12 million) by today’s exchange rate.

The loan has been re-paid through self-liquidation.

The PCP exit will also see it give up its sit on the Africert board. Mr Ndagu who joined the board in 2006 has since resigned.

“Throughout this period, Pearl (Capital Partners), alongside all our other shareholders, has given us financial and business advisory support, and we are very grateful to them, and all our other investors, for their support,” said the Africert chief executive Ruth Nyagah in the statement.
PCP invests between $250,000 (Sh21.5 million) and $2.5 million (Sh215 million) in small and medium sized enterprises in the form of loans, equity or a mix of the two.

Last month, the Uganda-based PE firm closed two regional deals.

Other deals

Other investments include the $1 million equity stake in Alemayehu Makonnen Farm PLC, a commercial farm located in Oromia Region, Ethiopia made in November.

The $1 million (Sh86 million) investment saw PCP acquire a 45 per cent equity stake in the firm that sells hybrid maize, wheat and other grain seeds for the Ethiopian market.

PCP also invested $400,000 (Sh34.4 million) in Dengo Comercial Limitada, a seed growing company in Mozambique, through a mixture of both and equity.

In 2007, PCP invested $1 million in Western Seed. The five-year loan was split into a $400,000 loan at a 9.5 per cent interest rate and a $600,000 loan at eight per cent rate with a 5.5 per cent premium hived from after-tax profit.

The loan was later converted into a 20 per cent equity stake in Western Seed in 2008.

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