Private Equity | Ethos Capital’s JSE Listing to Fuel Private-Equity

South Africa, Capital Markets in Africa: EPE Capital Partners intends to raise as much as 2 billion rand ($140 million) in a stock placement and Johannesburg listing that will allow shareholders to invest in a portfolio run by sub-Saharan Africa’s largest private-equity firm.

Ethos Capital, as the listing entity is known, will sell as many as 200 million shares on Aug. 5 to selected investors and institutions, including Coronation Asset Management (Pty) Ltd, Abax Investments (Pty) Ltd. and Standard Bank Group Ltd., Ethos Capital Chief Executive Officer Peter Hayward-Butt said in a phone interview on Monday.

“In a South African context, the lack of liquidity really has prevented the majority of institutional and high-net-worth individuals from coming into private equity as an asset class,” Hayward-Butt said from Johannesburg. “This listing will enable those guys to come in and help fully fund the new strategies that Ethos Private Equity is looking to launch.”

The buyout firm will raise as much as 10 billion rand starting this year for its Fund VII, of which 2.5 billion rand may come from the Ethos Capital listing,Stuart MacKenzie, chief executive officer of Ethos Private Equity, said on the same call. The funding will be used to buy stakes in unlisted companies with market-leading positions and significant growth potential, he said. It won’t invest in mining, property, infrastructure, alcohol or tobacco, he said.

The private-equity arm is also raising as much as 3 billion rand for its Mid Market Fund I that will invest up to 350 million rand each in black-owned companies that are valued at as much as 1.5 billion rand, the CEO said. The listing may contribute as much as 1 billion rand to the fund, he said. Another 400 million rand from the listing would be added to the firm’s Mezzanine Fund, MacKenzie said.

The investor’s Fund VI, which may earn 600 million rand from the listing, plans to sell Waco International Holdings Ltd., a South African construction-equipment rental company, to a “strategic buyer” by the end of the year, MacKenzie said. He wouldn’t give the name because the information is sensitive, he said. Wacocanceled an initial public offering on the JSE in October that was supposed to raise 1.9 billion rand after the collapse of a support structure for a bridge over a Johannesburg highway killed two people.

More than 90 percent of the private-equity company’s investments have returned more than twice the capital spent, with 57 percent profiting greater than three times, MacKenzie said. Funds III and IV showed net internal rates of return of about 22 percent, he said.