Global emerging market private equity investor, Abraaj Group, has set sights on the African consumer and her retail sector through its agreement to purchase 100% of African coffee chain Java House from Founder Kevin Ashley and Emerging Capital Partners (ECP) earlier this month.
Earlier in the year it was reported that other private equity investors including TPG and Carlyle were keen on acquiring the chain in a deal valued at approximately $100m in line with bids sought from ECP. After being established in 1999, ECP acquired 90% of the coffee chain, leaving Ashley with a 10% stake. Since then, the company has recorded sporadic and spontaneous growth, moving from 13 outlets in Nairobi as at 2012 to 60 all across the nations of Kenya, Rwanda, and Uganda. Within that time, they have also launched two restaurant brands; Planet Yoghurt and 360 Degrees Artisan Pizza.
The intense competition that was recorded is only a testament to the growing interest that has been shown by companies in East Africa, especially in the consumer sector. Abraaj, in partnership with the management team, is looking to leverage the leadership position in the market that is currently occupied by Java House to drive the company to become the leading pan-African casual dining / food services platform. The aim is to collectively build a leading home-grown African casual dining and food service group that will cut across the Eastern, Western, and Northern parts of Africa.
Kenya is known for its matured retail sector relative to the rest of Africa as the country has been able to foster the creation of large homegrown retail giants such as Nakumatt instead of relying on South African anchor tenants such as Shoprite and Game like many other African countries. According to the 2017 Knight Frank Africa report, Nairobi (Kenya’s capital) currently has the largest retail stock in any Sub Saharan African city at c. 500,000sqm, double the 250,000sqm recorded in Windhoek (Namibia) the city with the 2nd largest stock.
According to Alex-Handrah Aimé, an ECP managing director, the return that was made by ECP on its investment on Java House has been good and consistent with what they’d expect.
Commenting on the transaction, Mustafa Abdel-Wadood, Managing Partner and Global Head of Private Equity at The Abraaj Group, said:
“This landmark transaction, which showcases our ability to source outstanding assets across our target markets, is a compelling opportunity to build on Java House’s success story across sub-Saharan Africa, to create a true regional champion. Africa’s rapidly expanding middle class, sustained population growth and increasing urbanization is creating compelling investment opportunities in multiple sectors, and we believe Java House is ideally positioned to benefit from these trends.”