Dubai-based private equity fund Abraaj Group has in recent months invested billions of shillings in local companies, signalling its strong bet on the Kenya economy’s future growth.
The Competition Authority of Kenya (CAK) last month approved Abraaj Group’s acquisition of a 56.2 per cent stake in Kenyan hospital chain Avenue Group, making it the latest of the PE fund’s string of local acquisitions.
The deep-pocketed firm with a $10 billion (Sh1 trillion) portfolio under management across three continents in the Middle East, South Asia and Africa has in recent years made significant investments in four hospital chains, a milk processor and a hospitality chain.
In July this year, Washington-based Emerging Capital Partners (ECP), which owned 90 per cent of Kenyan restaurant chain Java, announced it was selling its entire stake to Abraaj in a takeover plan that also forced Java Coffee House’s founder and chairman Kevin Ashley to part with his 10 per cent stake.
Abraaj at the time said it could not comment on the financial details of the transaction but people familiar with the deal then said it was valued at Sh13 billion.
Abraaj has injected Sh320 billion in 80 transactions across Africa. It is yet to disclose the value of its Kenya portfolio.
The group also owns 10 per cent of the Kenyatta family’s Brookside Dairies.
Its independently run Abraaj Growth Markets Health Fund (AGHF), a $1 billion (about Sh103 billion) health fund focused on Africa, India, and Pakistan, has also been snapping up Kenyan hospital chains firming its grip in the sector.
Abraaj’s health fund includes money from the Bill & Melinda Gates Foundation, the medical parts companies Philips Healthcare and Medtronic, as well as other big institutional investors.
According to Fredd Kambo, a director in the healthcare team at the Abraaj Group with responsibility for East Africa, the PE firm plans to invest in Kenyan’s underserved healthcare sector.
“Essentially, AGHF is on a mission to provide affordable, accessible, and high quality healthcare to middle and low income patients in the region,” said Mr Kambo in interview.
“As an example, the provision of hospital beds per 10,000 people stands at 14 in Kenya versus a global average of 27. We therefore are embarking on a journey to partner with local healthcare operators to provide them with capital and expertise to address the urgent need.” Mr Kambo said.
Abraaj Group is shopping to expand its interests in Kenya’s healthcare sector.
“Right now we have invested in Nairobi Womens Hospital, Avenue Hospital, Metropolitan Hospital, and Ladnan Hospital.
"We are also interested in diagnostics and are seeking opportunities to invest in lab and imaging businesses in this area. Apart from the direct acquisitions, we have conducted a free NCD screening programme which reached 32,000 people in Nairobi,” said Mr Kambo.
Kenya has been tipped to remain a hotspot for private equity (PE) with global deal makers expected to be attracted by an improved business environment.
Analysts at Cytonn see the financial services, information and technology sectors as some of the key areas set to interest investors on the back of good returns.
“We remain bullish on PE as an asset class given the abundance of global capital looking for opportunities in Africa, the attractive valuations in private markets compared to public markets and better economic growth in Sub-Saharan Africa compared to global markets,” it said early this year.
Thirty three of the private equity deals in 2016 in East Africa had a disclosed value totalling Sh48 billion and, 14 of them with value of Sh30.6 billion came from Kenya.
The firm noted the improvement in ease of doing business, high return potential across all sectors, a well-diversified economy and consolidation in sectors such as financial services has created an avenue for increased PE activity.