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ETHOS BUYS KEVRO FOR 850M, 'PLANS FURTHER ACQUISITIONS'

BUSINESS DAY: 31 January 2012

Private equity firm Ethos yesterday announced it had acquired South African corporate promotions company Kevro for R850m and said it planned further acquisitions in the first half of this year.

The acquisition confirms earlier reports by experts in the private equity sector that appetite for deals has not been affected by the general economic uncertainty. 

But there was still a gap between valuations and the price that sellers were prepared to accept. 

Formed in 1984, Ethos is raising $750m under its Fund VI which will fund acquisitions of companies that can be dominant players in the South African and selected other African markets, said Anthonie De Beer, a partner at Ethos. 

The acquisition of Kevro - its 101st since Ethos was started - was part of a flurry of recent corporate activity during which it bought Universal Industries in the second half of last year, and launched a initial public offering for sports goods company Holdsport. 

Kevro was founded in 1990 and has grown into a leading supplier of corporate clothing and promotional products in Africa. It sources and distributes the most comprehensive range of clothing in the industry, while offering a wide and growing range of corporate gifts and related branding services such as embroidery, printing and engraving. 

Mr De Beer said Ethos was always on the look out for acquisition opportunities and was not solely focused on a single sector.  “We are quite busy from both the sale and buy side and that is always nice.  There are a lot of opportunities in the market and this is (always so) when the market are uncertain.” 

He said Ethos was a strategic and a long-term investor, preferring to remain invested in an asset for four to seven years before exiting at a profit. Exits were a combination of selling its stake to other strategic investors, or through listings. This was the standard route used by private equity firms globally, according to industry experts. 

Mr De Beer said while Ethos was still primarily focused on SA, it had also bought into the Africa growth story and was focusing on the markets in sub-Saharan Africa.  This was the same market that bankers, retailers and telecom firms were also staking their future on as they eye a growing middle class population of more than 800-million people. 

Global private equity firms Bain, Actis, Carlyle and 3i of the UK are reportedly scouting for opportunities in market ranging from Nigeria, Ghana to Kenya and Egypt. 

“We are definitely selectively looking into sub-Saharan Africa but we are still focused on SA as being the hub and dominant source of activity,” Mr De Beer said. 

“There are enormous opportunities in SA and it is interesting to see a number of companies that don’t have Africa strategies on their agenda and seem to be in a comfort zone where they are satisfied with the (home) market they are serving. So we want to sit down with them and focus on where their next strategies are and opening up opportunities for them and create focus.”