African private equity manager EXEO Capital has reached a final close on its second food and agribusiness fund at $146 million.
Agri-Vie Fund II is a 10-year closed-end fund with a target of $150 million. EXEO’s first fund, Agri-Vie Fund I, closed on $100 million.
Speaking to Agri Investor, EXEO Capital managing partner Herman Marais said the proportion of private-sector investors committing to Fund II had increased to around 50 percent of the total raised, up from 30-35 percent in Fund I. The balance came from development finance institutions.
Marais acknowledged that raising capital for a specific sub-sector in sub-Saharan Africa was a “challenge” but said that for long-term investors in the region EXEO had been able to align Fund II’s objectives with “the fundamentals that drive growth and development on the continent.”
“We talk [with investors] about fundamentals such as demographics and urbanization, and the aspirational development of the African consumer – all of those things still continue to drive demand for [food] products and services that local suppliers can play into,” he said.
“It’s not easy to get around the reality that the agri sector is still, outside of resources, the largest economic sector in most of the countries that we work in. So for any long-term investor that wants to establish an exposure to African consumer development, the food-related space remains a very logical entry point, and that is what we could offer with Agri-Vie Fund II.”
The fund aims to achieve net returns for investors in the “mid-teens,” Marais added. Investments in Fund II will typically be in the $5 million-$15 million range and generally higher than the average ticket size of $7 million in the first fund.
Fund II has already made five investments, including a 49 percent stake in Zambian cold-chain distribution business Capital Fisheries, an investment in Marginpar Flower Group in Kenya and Ethiopia alongside Norwegian DFI Norfund, and a minority stake in South African aquaculture firm TerraSan.
Marais said that Fund II would look for companies with strong management teams and the potential to increase in scale quickly, as well as add vertical integration capabilities.
“Vertical integration both forwards and backwards is quite important to our business model. We’re generally not an investor in standalone primary agriculture – we prefer to see it folded into a business that is active across the rest of the value chain, that does the processing and distribution to the end consumer,” he said.
EXEO will shortly announce further deals in packaging and distribution, Marais said, and intends to invest in West Africa for the first time through Agri-Vie Fund II.
In South Africa, EXEO is partnered in Fund II by Kuhle Capital, a black-owned investment group headed by Wiseman Nkuhlu.
Nkuhlu said in a statement: “We are proud of our association with this fund and look forward to making a contribution to the much-needed development and transformation of the food and agri sector in South Africa.”
EXEO was founded in 2015 as a partnership between the founders of Agri-Vie and Stanlib Asset Management, a pan-African investment manager.