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Actis grows its acquisition footprint in Africa

| On the move

In the past 18 months, private equity firm Actis has been buying up stakes in South African companies.

Food Lover’s Market was the latest company to team up with the emerging markets investor. Actis’ acquisition of a 30 percent interest in Food Lover’s Market last year gave the fresh produce retailer access to capital as the company seeks to expand into the rest of Africa. The Competition Tribunal earlier this month approved the transaction.

When it sought the approval of the transaction, Food Lover’s Market told the Competition Commission that it was looking for a partner with “a deep history” of building businesses across Africa.

Actis invests in emerging markets in Africa, China, India, Latin America and south-east Asia.

“This latest transaction is Actis’ fourth investment in South Africa in 18 months, following its recent investments in Coricraft, one of South Africa’s leading home furnishings retailers, Tekkie Town, the country’s leading independent sports shoe retailer, and CSH, a credit bureau and information services business,” Actis spokeswoman Sarah Douglas said.

Supporting growth

Food Lover’s Market is a special purpose vehicle established to acquire and hold the grocery, retail, distribution and franchise operations of fresh produce chain store Fruit & Veg City.

Actis said it would support Food Lover’s Market growth in South Africa and other countries in sub-Saharan Africa.

Food retail was the largest retail sub-sector in the South African economy, valued at R471 billion, Douglas said.

“Actis has a strong track record of backing high-quality food retail businesses in other emerging markets including supermarket chain, Companhia Sulamericana de Distribuição in Brazil and Nigiris, one of India’s best known food retail brands,” Douglas said.

Chris Gilmour, an analyst at Absa Wealth and Investment Management, said the Food Lover’s transaction was a marriage made in heaven.

“Food Lover’s Market is in big demand, but I think it now realises it is too big to be allowed to be bought up by any of the established food retailers. Thus, how does it expand? As it is not listed, it cannot raise capital via a rights issue. Taking on a private equity partner thus makes an awful lot of sense,” he said.

“Food Lover’s Market is doing exceptionally well in the food and fresh space. Its high quality distinguishes it from the rest and it has a large and growing following. It is particularly strong within the ranks of the emerging middle class due to its insistence on high quality. And yet, its prices are reasonable – no wonder that a company like Actis wants a stake in this rapidly-growing company,” Gilmour said.

As it expands into the rest of Africa, Food Lover’s Market will also tap into Actis’ track record in the continent.

“Moving into the rest of Africa requires on-the-ground knowledge of Africa. Difficult logistics and scarcity of land make African investment extremely hazardous. Actis has been investing into Africa in a big way for a number of years and thus offers on-the-ground experience to Food Lover’s Market,” Gilmour said.

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