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Actis Africa Agribusiness Fund

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  1. Actis Africa Agribusiness Fund October 2007

  2. Who is Actis?

  3. London Karachi Beijing Karachi Delhi Mumbai Bangalore Kuala Lumpur San José Singapore Jakarta Santa Cruz Casablanca Cairo Lagos Nairobi Johannesburg Leading Emerging Markets Private Equity Firm with a Focus on Africa • Who is Actis? • 60 years experience in investing in emerging markets • Over US$3bn funds under management and an additional US$1.4bn of new funds committed • Focus on: • Africa, Asia and Latin America • Expansion capital, buyouts and privatisations Actis in Africa • Managing a new African fund of US$550m • Single investments US$10m-75m • Can syndicate equity to co-investors for large transactions • Use of leverage enables access to large transactions • Property Fund of US$100m • Agribusiness Fund of US$100m • Empowerment Fund of US$50m • To finance participation of African entrepreneurs in transactions

  4. Investment Criteria/Strategy • Actis generally targets established firms in growth sectors • Agriculture, Consumer goods, Telecommunication, Financial Services, Mining & Industrials • Specialised infrastructure funds: Property, Transport, Power and Agribusiness • Strong management team: track record and business principles • Clear and realistic exit route with investment horizon of 3-7 years • Align interests of all major stakeholders (other shareholders, management, regulators, etc.) • Investment range, US$10m to US$75m and stakes from 25% to 100% • Focus of risk capital provision • Expansion capital (organic/M&A) • Change of control transactions (MBOs, MBIs, P2P, strategic alliances) • Privatisations (generally under-capitalised requiring modernisation) • Appropriate combination of equity, mezzanine finance and debt

  5. Actis value-add approach • Leverage global contacts with Operators, vendors, government and regulators to help business grow • Leverage office network for cost effective market intelligence, and business development • Able to make follow on Investments • Leverage contacts with lenders and equity investors • Appoint industry experts to the Board • Participate in building effective strategy • Reputation for transparency & integrity/business principles • Introduce high standards of corporate governance and financial management • Maximise shareholder and exit values • Access to network of managers: assist in recruitment • Able to second staff if needed

  6. Agribusiness Fund

  7. Overview and Investment Strategy • To invest in equity and quasi-equity in the African Agribusiness sector • comprises activities related to production and processing of, and services related to (i.e. inputs, logistics, distribution and marketing) biological products, plant or animal, whether for food or non-food purposes • Investment type • mainly expansion capital in both new and existing investments • includes rehabilitation and buy-and-build • Control • Control preferred but not exclusively • New investment focus: • Low capital intensity, participation across value chain • No greenfield start ups • Deal size will be US$4m to US$15m • Follow-on investments • From US$1m • Exposure • Country: Max 50%; Sector - Max 33%

  8. Critical Success Factors • Back first class, local, aligned and experienced business management teams and sponsors • Take control positions or, exceptionally, minority positions with significant influence • Invest in value add, market led, established businesses in free markets • Experienced sector specific and focussed management team at fund level • Access to well established Africa wide Actis presence and deal sourcing • Rigorous application of the Actis investment and decision making process

  9. Lessons Learned from Past • Importance of management • First class, local, aligned management and sponsor • Markets: • Growth potential; free not adversely controlled markets • Maximise competitive advantage • Agricultural production where climate and soils are word class; locate labour intensive industries where labour is readily available • Production of basic commodity crops not normally attractive: • Price controls; subsistence farmer competition; land / political issues • Agribusiness risk mitigation: • Location; competitive production advantage; invest in added-value operations; outgrower model • Investment type: • Expansion capital preferred; no greenfield start ups • Infrastructure limitations • Leads to excessive capital cost; acquire developed assets at discount to cost • Exit • Achievable, but timescale can be longer, mitigated by yield-based return • Long term view • Agribusiness and forestry not wholly suited to closed end fund structure

  10. New Investment Criteria - Deal • Fully commercial return on capital • Attractive value/entry price proposition • Must have alignment with management, shareholders and other stakeholders • Must have influence for value add, exit etc (control / strong shareholder rights) • Clear route to exit, with Actis ability to control • Proprietary deal flow preferable • Enhances CDC’s reputation as a responsible investor

  11. Challenges for Private Equity in Africa • Management skills: • Limited entrepreneurial/managerial talent with successful track record • Information availability: • Requires rigorous due diligence, often using external firms & industry experts • Pricing risk: • use of external experts to address, limited comparables • Debt availability: • Depth of financial markets and cost of debt • Exit risk: • Capital redemption mechanisms and strategic buyer screening to assess exit prospects • Legal and regulatory framework: • Ability to exercise legal agreements • Country risk: • Market intelligence and influence can mitigate this risk • Exchange rate risk: • Mitigated by foreign exchange denominated earnings

  12. Contact Details Michael Turner Partner Paul Kavuma Investment Principal Norfolk Towers, Kijabe Street, 1st Floor P O Box 43233-00100 Nairobi, Kenya Tel: +254 202 219 952 Mob: +254 (0) 734 770978 Fax: +254 202 219 744 Norfolk Towers, Kijabe Street, 1st Floor P O Box 43233-00100 Nairobi, Kenya Tel: +254 202 219 952 Mob: +254 (0) 734 770978 Fax: +254 202 219 744