R300m Raised For Sphere Debut Fund
Sphere Private Equity, a black-owned and managed private equity company, said yesterday it had raised R300 million for its debut fund, Sphere I, and would target investments that would benefit from the state's infrastructure and consumer spending. Sphere Private Equity is 70 percent owned by Sphere Holdings and 30 percent owned by private equity firm Ethos.
Itumeleng Kgaboesele, the chief executive of Sphere Private Equity, said more than 50 percent of the funds were raised locally and the remainder was sourced offshore. He said the fund would focus on small to medium-size investments that had exposure to the government's infrastructure spending of more than R400 billion over the next three years, as well as buoyant consumer spending.
The company would also target enterprises with a value of between R50 million and R200 million. Companies targeted would include construction. He added that the fund would ideally have seven or eight investments in companies in different sectors.
Sphere participated together with Ethos in the buyout of Savcio Holdings in November last year, in which the company took a 12 percent stake. Kgaboesele said the success in raising the R300 million was evidence of the success that the partnership between Ethos and Sphere had achieved.
Ethos recently announced it had raised R5.5 billion through its Ethos Fund V, which would add momentum to its quest for larger transactions. It is part of the consortium that is pitching for a R8.3 billion bid for embattled financial services group Alexander Forbes. The switch to larger deals by industry leaders such as Ethos would open a gap for their smaller peers, Kgaboesele said. This, coupled with the increased interest from local and domestic investors, would make the future brighter for the private equity industry.
In the past few weeks, three JSE-listed companies - Alexander Forbes, Edgars Consolidated Stores and Shoprite - confirmed they were in negotiations with private equity investors. The three companies have combined market value of about R40 billion.
Private equity industry experts said this was a sign that investors were looking for larger transactions because of the expected handsome returns. There was also an element of foreign investors looking for alternative high-yield jurisdictions in emerging markets.
Kgaboesele said Sphere investors would have exposure to larger investments through its co-investment deal with Ethos, which enables the two firms to invest alongside each other.