The Metier Capital Growth Fund II (MCGF II) completed its first close in mid-February 2015 and further closings in 2016, raising in excess of R2.5 billion with further commitments expected.
The fund’s investment theme is premised on obtaining significant exposure to South, Southern and Sub-Saharan Africa. It concentrates on mid-cap entrepreneurial businesses requiring growth capital, in sectors which demonstrate emerging market growth potential.
MCGF II is targeting exposure of 50% to Sub-Saharan Africa, excluding South Africa. This will be achieved by a ‘look through’ approach, investing into South African-based companies which are well positioned to expand into the continent, leveraging experienced, talented South African skills to access markets and dealflow.
Investments are targeted in sectors including transport and logistics; retail; health; tourism; Fast Moving Consumer Goods; agri-processing; infrastructure services and education. These are sectors set to benefit from demographic trends such as population growth and increased urbanisation, and the accompanying consumer spend from the emerging middle class. Fund investments are also in sectors which are advantageously exposed to the multiplier effects of rising capital spend on infrastructure and increasing intra-regional and international trade.
The first closing is with investors that Metier has had prior relationships with. They include South African institutional investors and international investors Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO, the Dutch development bank) and Germany’s DEG (Deutsche Investitions und Entwicklungsgesellschaft mbH). Investors part of the second closing include the International Finance Corporation, Porparco (a subsidiary of the French Development Agency (AFD)), frontier market investor Sarona and Averroès Finance III, a fund sponsored by Proparco and Bpifrance, the French public investment bank. The South African based investors include institutional investors such as Investment Solutions, MMI Group Limited, local pension funds and asset managers. The Metier team has also made its own material financial commitments to the fund.
MCGF II is targeting 8 to 12 investments, with controlling or significant minority private equity holdings. It has a ten year intended term, and makes moderate use of financial leverage. After conclusion of its retail transaction, the fund pursued growth investments in the consumer foodservices (Life and Brand Co), the engineering and ship repair services (Southey) and the pharmaceutical and complementary alternative medicines sector (Astrim Holdings). After the conclusion of the four initial transactions, the fund is now pursuing deals in the health care services and agri-processing sectors.