UK-based Actis has signed an agreement to sell Java House to two Africa-focused private equity (PE) funds for an undisclosed sum, marking the latest ownership change in the restaurant chain that was founded in Kenya.
A notice by the Comesa Competition Commission, a regional antitrust watchdog, shows that Alterra Capital is set to assume majority shareholding in Java while Phatisa will have controlling rights despite its minority stake.
Alterra Capital focuses on investments in Africa notably those in the food and beverage, hospitality, retail, telecommunication, technology, financial services, logistics and infrastructure.
Phatisa, set up in 2005, has interests in the food value chain.
The Comesa Competition Commission (CCC) has invited interested stakeholders, including competitors, suppliers and customers of the parties, to submit their representations to help it make its decision on the buyout.
“The parties submitted that the proposed transaction would enable the seller (Actis) to exit and realise its investment and will enable Alterra and Phatisa to acquire controlling stakes in the target and promote growth of its business,” the regulator said in the notice dated January 23, 2025.
This will be the fourth time the ownership of Java House –founded in 1999 by Irish-American Kevin Ashley— will be changing hands.
The restaurant operator received its first outside investment in 2012 from PE firm Emerging Capital Partners (ECP), which gained a 90 percent stake in the deal.
ECP and Mr Ashley –who held a 10 percent stake in Java— in 2017 sold out to Dubai-based PE fund Abraaj Group, which took full ownership of the company that was growing fast.
The transaction was reportedly valued at Sh13 billion at the time, making it one of the largest in the restaurant business in Kenya’s history.
At the time of ECP’s investment in Java, the company had 17 stores. The restaurant now has 73 branches in Kenya, Uganda and Rwanda after an aggressive expansion that saw it add Planet Yogurt, Foodscape, Sixty Degrees and Kukito Africa food brands.
Unlike ECP, Abraaj did not reap from its investment in Java. The Dubai-based PE firm filed for liquidation in June 2018 in Cayman Islands in the wake of a scandal that showed it had misappropriated funds from its investors and lenders, besides falsifying financial accounts.
The Dubai Financial Services Authority (DFSA) in July 2019 fined two Abraaj entities –Abraaj Investment Management Limited and Abraaj Capital Limited— a total of $315 million for deceiving investors and the regulator.
A month earlier, the Competition Authority of Kenya (CAK) had approved indirect control of Abraaj Investment Management Limited by Actis International Limited.
The deal saw Actis take ownership of the assets that Abraaj owned, including the Java business.
“The proposed transaction is an acquisition of control by Actis of the management rights over Abraaj Investment Limited’s funds, effectively giving Actis complete control rights over their portfolio of companies which are currently being controlled by the target funds,” the CAK said at the time.
The growth of Java inspired the entry and expansion of other restaurant chains, increasing competition in the industry where menu price lists start from a few hundred shillings to Sh3,000.
Java’s competitors include Artcaffe, KFC, Subway, Big Square, CJs, and Pizza Inn, with the players fighting for the wallets of the middle class and the rich.
Supermarket operators offering dining services such as Naivas are another source of competition.
The food industry took a major hit in the wake of the Covid-19 pandemic in March 2020 when travel restrictions and work-from-home policies took root.
The end of the pandemic has seen a resumption of dining out, with restaurants also benefitting from growth in deliveries built on online apps.
The players also reported a drop in footfall in parts of 2023 and 2024 during the protests led by Kenya’s opposition and the youth respectively against higher taxation.
Competition in the restaurant business is set to increase amid continued expansion by the major chains and independent operators.
Simbisa Brands Limited, the owner of the Chicken Inn, Pizza Inn and Galito’s, is among the firms that have opened scores of new outlets in the past few years.
The expansion has featured going into second-tier cities such as Kisumu and Nakuru besides setting up in the suburbs of Nairobi where middle class communities are growing, attracted by the relatively cheaper cost of housing compared to the central business district.
