Capitalworks Investment Partners Pty Ltd plans to invest R5 billion of newly raised cash in mid-sized South African companies hit by a shrinking local economy and the coronavirus pandemic.<\/p>\n
The firm raised 25% more than planned for its Private Equity Fund III from Morgan Stanley\u2019s Alternative Investments Partners unit, institutional investors and wealthy families, Capitalworks founder Chad Smart said.<\/p>\n
The Johannesburg-based company is seeking businesses with enterprise values from R250 million rand to R4 billion rand in industries such as financial services, food, and health.<\/p>\n
\u201cThere are high-quality businesses that are unduly punished by the virus that would usually use a crisis to gain market share,\u201d he said in an interview.<\/p>\n
\u201cWith the coronavirus, a number of them don\u2019t have turnover coming in, it\u2019s an unusual situation. The liquidity and growth-capital need means that you can find the best companies to invest in.\u201d<\/p>\n
Africa\u2019s most-industrialized economy was in a recession even before measures to contain the coronavirus brought businesses to an abrupt halt.<\/p>\n
That has also opened opportunities in industries like tourism, which has been especially hard hit by travel curbs, and alternative health care as people look for ways to protect their immune systems, Smart said.<\/p>\n
\u201cThe investment will have a knock-on effect of another R5 billion to R10 billion on top of the money raised\u201d as debt is typically used to leverage deal sizes, he said.<\/p>\n
New York-based Morgan Stanley\u2019s AIP unit focuses on investments in sectors and markets like small- and medium-sized businesses in South Africa, which, while relatively under-capitalized, offer \u201ccompelling potential for returns,\u201d said Vikram Raju, the head of the bank\u2019s AIP\u2019s emerging market and impact division.<\/p>\n
Prior investments by Capitalworks include Rhodes Food Group, mining company Rosond Pty Ltd and Minet Group, a pan-African insurance brokerage.<\/p>\n