Rockwood closes exits of R9.4 billion and realises high returns

Rockwood Private Equity, established as an independent private equity firm in 2013, believes South Africa is a valuable investment destination and has successfully used its South African platform to grow into Africa.
The firm has realised high returns from its assets to date. It recently closed the sale of Tsebo and Safripol, which are among the largest exits ever done by private equity funds in South Africa, with aggregate gross exit proceeds of some R9.4 billion. The returns from these two assets since acquisition in 2006 and 2007 respectively have been significant. The aggregate internal rate of return achieved was in excess of 23%, outperforming the JSE All share IRR for 2007-2016 (9.6%). The money back return was over 6.5 times.
Rockwood Managing Partner and CEO Andrew Dewar says: “These returns demonstrate that South Africa remains a really great country for private equity and that superb outcomes are achievable with the right business, strategy, management team, black economic empowerment (BEE) partners and fund manager - irrespective of economic cycles and political changes.
Our management teams, BEE partners and banking partners all benefited significantly from the Safripol and Tsebo transactions. The two companies achieved significant job creation, with the aggregate number of employees of the companies increasing from about 10,000 to over 34,000 over the past 10 years.”
In August last year Rockwood Private Equity, Thebe Investment Corporation and management shareholders announced the successful sale of plastics manufacturer Safripol to KAP Industrial Holdings, a JSE Top 100 company, for an equity value of R4.1 billion. The transaction was the largest reported private equity exit in recent years and one of the largest reported private equity transactions in South African history. Safripol exports products directly and indirectly to more than 7 African countries with exports sales expected to triple to 30% of turnover by 2020.
Just a month later, during September 2016, Rockwood announced that it, along with Nozala, Lereko and management, had entered into an agreement to sell its interest in the Tsebo Group to Euronext listed Wendel Group for an equity value of R5.35 billion. Tsebo is a leading pan-African facilities services provider operating across 23 countries in Africa and with annual revenues of about R6.5 billion. During the time Rockwood held Tsebo it improved from a Level 3 B-BBEE rated company to the first company in its sector to achieve a Level 1 B-BBEE rating under the new BEE codes.
Both the Safripol and Tsebo deals were subject to certain conditions, including customary regulatory approvals, all of which have now all been satisfied. In terms of gross proceeds, these deals rank amongst the largest exits ever done by private equity funds in South Africa.
Rockwood acquired Tsebo and Safripol before the global financial crisis and, as a result, had to hold onto them for longer than is normal in private equity to fully implement its strategy and to compensate for the impact of the crisis. The firm found that the quality of the assets made selling them in the current economic environment marginally easier than it initially anticipated, but that the sales processes still required significant input and effort from the team and its advisors.
“Key to our success is the stability of our senior leadership team, all of whom were employed by Barclays Africa and were involved in the acquisition of our portfolio,” said Dewar. Rockwood was established in 2013 after Barclays Africa sold its private equity interests to the investment team and two international private equity investors in the largest secondary transaction in South Africa. The Rockwood team comprises individuals from diverse backgrounds but with extensive experience in their respective disciplines pertaining to private equity.
Rockwood has a generalist sector approach, focussing on companies expected to grow faster than South African gross domestic product, but it avoids investing in the primary agriculture, property, armaments, tobacco and mining sectors. Because responsible investing is vital to building sustainable businesses, Rockwood also carefully considers environmental, social and governance matters during the investment appraisal process and continues to monitor them during the investment holding period.
Rockwood typically invests in large South African headquartered companies which have growth opportunities into Africa. They target companies of enterprise values of R500 million up to R3 billion which demonstrate reliable cash generation. Rockwood prefers to have control or near control positions.
About Rockwood
Rockwood Private Equity (Pty) Limited is a leading South African private equity fund manager and the general partner of Rockwood Fund I. Rockwood was established in 2013 after Barclays Africa sold its private equity interests to the investment team and two international private equity investors in a first-of-its-kind secondary buy out in South Africa. Rockwood is an active private equity house that focuses on taking substantial equity positions in medium- to large-sized companies with experienced management teams.
01 February 2017