Following the backing of a private equity (PE), Africa’s richest man Aliko Dangote is set to get a piece of Kenya’s food and beverages market as he prepares to acquire restaurant chain Java House for an undisclosed amount.
According to BusinessDailyAfrica, Mr Dangote, who is worth $27.4 billion (Sh3.54 trillion) according to the Bloomberg Billionaires Index, is among the investors backing Alterra Capital—the African-focused private equity fund that is seeking regulatory approval to acquire a majority stake in Java from UK-based Actis. The other PE fund in the Java deal is Phatisa.
Alterra, which was founded in 2020 to invest in Africa, is a $500 million fund that seeks to buy stakes in high-growth sectors such as food and beverages, retail and telecommunications funded by a string of tycoons, including Dangote. For Dangote, the Java deal gives him a toehold of the Kenyan market after delayed attempts to invest in the country’s cement and mining businesses. The deal, which is awaiting clearance by the Comesa Competition Authority (CCA), will give Alterra and Phatisa control over a business that has been on an expansion drive and now has 73 branches in Kenya, Uganda and Rwanda. “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 the growth of its business,” said CCA in the notice.
The deal will also give Mr Dangote a piece of other brands under the Java business, including Planet Yogurt in Kenya, Three Sixty Degrees Pizza in Kenya and Rwanda, Kukito Africa in Kenya and Foodscape Africa 2—a centralised procurement and commercial production kitchen which produces baked goods, coffee and cooked food. Former executives of the US private equity giant, Carlyle Group in Africa, including Genevieve Sangudi, Eric Kump, Idris Mohammed, and Bruce Steen, founded Alterra at a time when the firm was cutting its exposure in Africa.
The fund attracted Mr Dangote and billionaires David Rubenstein and Bill Conway as some of its investors. Mr Dangote and other investors saw a chance to back African-focused PE funds interested in investing in relatively small and young companies that are thirsty for capital and had room for growth. Their push for deals in Africa was a departure from many Western PE firms that often focus on large deals in mature companies. The mismatch between the size of available deals in Africa and the target investment size of global private equity giants triggered top equity investors like Blackstone and KKR to retreat from the continent.
In May last year, Alterra teamed up with two other firms to form a consortium that acquired a majority stake in Chill Beverages, a producer of beverage products catering to consumers in Southern Africa. The acquisition marked Alterra’s first investment. Alterra’s backing from billionaire investors such as Mr Dangote mirrors the practice in many Western economies where influential business people opt to put their money in funds targeting specific sectors on top of their direct investments in companies. Their money becomes funding for early-stage high-risk ventures.
However, in Africa, the common practice has been that wealthy individuals hold stakes in different companies from which they earn a return. The Nigerian tycoon, who controls the Dangote Industries conglomerate that includes Dangote Cement and the continent’s largest oil refinery, had since 2014 been linked with entering Kenya’s cement market through a greenfield plant. However, this has remained pending. The billionaire investor in 2017 postponed plans to set up his cement plant in the country. He also missed the 2021 launch date without a word despite having described Kenya as a market that is “high on our priorities.”
The company, which already has a licence to prospect for limestone in Kitui County, was planning to set up two cement factories, one in Nairobi and another in Mombasa.
Mr Dangote visited Kenya in 2022 during the inauguration of President William Ruto, with watchers viewing this as a signal that the country remains on his radar. His conglomerate is involved in diverse sectors, including cement manufacturing, fertiliser, sugar refinery, rice farming, real estate, mining, logistics and maritime, aligning with some of the focus areas of President Ruto’s administration.
For instance, cement and fertiliser are products that feature heavily in the administration’s economic blueprint for scaling up affordable housing projects and providing affordable fertiliser to farmers across the country. Mr Dangote already has cement factories in Ethiopia and Tanzania. The 2.5 million-tonnes-a-year plant in Ethiopia was commissioned in 2015 and is the largest in the country. It came the same year a three million-tonnes-a year plant in Tanzania was opened. The tycoon also has a cement factory in Zambia, Cameroon, and Congo Brazzaville, each with an annual capacity of 1.5 million tonnes.
