Two American private equity funds are among a group of institutional investors in the race to acquire Kenyan coffee chain Java House in a transaction estimated to be worth $100 million (Sh10 billion).
Sources familiar with the deal said Washington-based Carlyle Group, which has $169 billion under its management and San Francisco-based TPG, a $74 billion fund, are among the firms seeking to acquire Java – the coffee outlet that has recorded fast growth since its inception in 1999.
Java is currently owned 90 per cent by Washington-based Emerging Capital Partners (ECP), which bought the stake in 2012 from the coffee chain’s founders, Kevin Ashley and John Wagner, who are Americans.
It was not immediately clear whether the intended acquisition is a complete takeover or a partial one precipitated by ECP’s exit in line with the medium-term investment plans of PE funds.
If it goes through, this will be Kenya’s largest restaurant industry transaction that should leave ECP with a handsome return on its investment.
The PE fund did not disclose the amount it spent to acquire the Java stake, which it insisted did not go to the founders but was used to fund the company’s growth.
The PE world has, however, put the amount at tens of millions of dollars.
The fact that the founders did not take out cash when ECP came on board indicates that they are likely to cash in this time round alongside the PE fund as a new investor buys the company.
Java’s sale will cement Kenya’s reputation as a high-return market that offers easy exit routes for PE funds and development finance institutions.
Most PE funds and DFIs have exited by selling to similar funds, indicating strong demand from institutional investors that pool funds from wealthy individuals, pension funds and governments.
Various PE funds have made double to triple digit returns after investing in large and medium-sized Kenyan firms for five to seven years.
The high returns have been earned across a broad spectrum of industries spanning private education, banking, healthcare, insurance and manufacturing.
Mr Ashley, who declined to comment on this story, has previously said Java’s annual revenues grossed Sh4 billion.
Credit: Business Daily