US global asset manager Carlyle Group has acquired an 18% stake in Nigeria’s Diamond Bank through its Carlyle Sub-Saharan Africa Fund at a cost of $147m, in a move confirmed by the bank in a statement to the Nigerian Stock Exchange (NSE).
According to the bank, the investment was made possible through Carlyle’s purchase of a portion of the $284m in shares recently issued by Diamond Bank on the floor of the NSE to gather funds for investment in infrastructure, branch expansion and lending.
Uzoma Dozie, CEO and MD of Diamond Bank, was quick to claim the transaction as a vote of confidence in the institution and its brand, while assuring stakeholders that all would benefit.
“Particularly, Diamond Bank stands to benefit from Carlyle’s extensive network of financial services specialists as it continue to strengthen its market position, expand commercial and retail offerings, and further enhance operations,” he said.
Carlyle is the world’s second-largest manager of investment alternatives to stocks and bonds, but the investment in the Nigerian lender is surprisingly its first in the West African country.
Overall, Carlyle’s Sub-Saharan Africa Fund has invested almost $300m in countries such as Mozambique, Zambia, Tanzania and the Democratic Republic of the Congo since 2011, and only recently capped off the fund at $698m – nearly $200m over its own capital expectations.
Carlyle’s investment into Diamond Bank opportunely comes after a 21% decline in the value of the lender’s stock over the course of the year, compared with the 18% retreat seen in the Nigerian Stock Exchange All-Share Index.
“We have known the Diamond Bank team ever since we started looking at the banking sector much more closely around two years ago,” Genevieve Sangudi, head of West Africa for the Carlyle sub-Saharan Africa Fund (CSSAF) told Euromoney.
“The banking sector in Nigeria reflects positive, long-term macroeconomic trends in the country, despite recent volatility, and we were keen to go into business with a well-diversified bank.”
In all, Diamond Bank has raised around $700m in tier 1 and tier 2 capital during the past two years, including a $200m debut Eurobond. Dozie explained that “liquidity has been tight in Nigeria,” and that “a rights issue at this point in time seemed like the most sensible option.”
Carlyle is also rumoured to have entered its first deal in South Africa, with the acquisition of a stake in South African tyre dealer Tiger Wheel & Tyre, though there has been no official comment or indication that such a deal has received approval from competition regulators.
Tiger Wheel & Tyre sells operates across South Africa, Namibia, Botswana and Mozambique, and the alleged deal for a portion of the company values the company at around $158m.
This year, the CSSAF has already invested $210m in the Tanzanian supply chain manager Export Trading Group, $100m in Mozambique’s J&J Africa, and in African metals interest Traxys.
Carlyle has also hinted of a further sizeable investment in a second Nigerian company by the end of the first quarter of next year, with Sangudi noting the “strong pipeline of deals we’re evaluating.”
US fund KKR, which hired Kayode Akinola in 2013 from Helios to head its Africa division, also made its first African investment in June when it invested $200m in Afriflora, an Ethiopian company exporting flowers to Europe. KKR’s Africa fund is one of the largest, at $6.2bn.
Africell Holding, the largest mobile-phone operator in Sierra Leone and Gambia, is meanwhile said to be courting various US private equity firms, including both Carlyle and KKR as Lebanese founder Ziad Dalloul looks to sell a stake in the $1.5bn company.
Founded in 2000, Africell has more than 10 million customers, including in the Democratic Republic of the Congo and Uganda, and expects to increase its predicted $200m revenue in 2014 revenue by 60% while doubling its profits from $67m in 2014 to $125m the next year.