DEAL: Ajinomoto’s stake in Promasidor

The combination provides the template for a successful Africa exit by a financial investor as multinationals bet on the region’s growing middle class

Japanese condiment manufacturer Ajinomoto’s acquisition of a 33.33% stake in Promasidor from an Africa-focused private equity fund is an example of a successful exit by a financial investor.

The deal, which saw Tana Africa Capital dispose of its 25% stake in one of the continent’s largest food companies, was preceded by a competitive auction process also involving PepsiCo. The Rose family, which founded Promasidor, sold down a further 8.33% stake. This time they were seeking a strategic partner rather than a financial one.

“A key concern for financial investors, particularly in emerging markets, is the viability of an ultimate exit,” said Rob Cant, partner at Freshfields Bruckhaus Deringer in Dubai who advised Ajinomoto. “So this is another great example of a financial investor, having helped the asset grow, running a successful exit process.” The share purchase agreement valued South Africa-based Promasidor, with operations in 36 countries across Africa, at approximately $1.5 billion. Valuations that high on the continent are usually reserved for mining or oil and gas firms – for a consumer goods company, it’s unprecedented.

“Large auctions are still relatively unusual in Africa, certainly competitive ones. That really shows the desirability of the asset,” said Cant. “It’s also unusual for a home grown consumer business to have operations in quite so many different markets across the continent, which helped support the valuation.”

The tie-up is the latest of a number of high profile, high-value consumer deals in the region this year. The combination in October of AB InBev and South African SABMiller, Coca Cola’s purchase of a stake in Nigerian drinks firm Chi, and now Ajinomoto/Promasidor suggest multinationals in mature markets are now looking to Africa and its growing middle class for growth.

South African Steinhoff’s proposed acquisition of Shoprite, Africa’s largest retailer, was also announced yesterday.

"Large auctions are still relatively unusual in Africa, certainly competitive ones"

Even as recently as the beginning of this year many corporates were redirecting their attentions back to their home markets. But as the once safe havens of the US and Europe look less stable on a political level and oil prices stabilise, Africa’s basic fundamentals meanwhile remain the same, this is a trend likely to continue for the foreseeable future.

According to Linklaters, this year has seen the introduction of a new type of investor in African assets. “Recently more traditional fund investors, such as domestic and foreign sovereign wealth funds, insurers and pension funds, seem to have an increased appetite for investment in Africa-focused funds,” said Linklaters partner Jonathan de-Lance Holmes.

He added that as these traditional investors are typically interested in a particular type of asset like healthcare, infrastructure and natural resources, fund managers are increasingly establishing more sector-specific funds.

DEAL PROTECTIONS

Signing and closing happened simultaneously so there was no need for deal protections.

TERMINATION RIGHTS

For the same reason, there were no termination rights afforded to either parties.

FINANCING

Ajinomoto paid all cash from its balance sheet for the 33.33% stake in Promasidor.

CONDITIONS

Because of the simultaneous sign and close, there were no conditions.

REPS/WARRANTIES

This information is confidential.

ANTITRUST/MERGER CONTROL

Pre-merger analysis found there to be no antitrust concerns, largely because Ajinomoto was only acquiring a minority stake in a market it didn’t yet have a presence in.

Tear sheet

Ajinomoto’s $530 million acquisition of a 33.33% stake in Promasidor from the founding Rose family and Tana Africa Capital closed on November 8. Freshfields advised Ajinomoto and Mcdermott Will & Emery advised Promasidor. Nomura was financial advisor to Promasidor and Goldman Sachs to Ajinomoto.

Local counsel included Udo Udoma & Belo Osagie in Nigeria, ENS in Ghana and South Africa, Vieira de Almeida in the Democratic Republic of the Congo and Bourabiat Associés in Algeria.