HELIOS INVESTORS II LP
- Reference: P-Z1-K00-024
- Approval date: 13/12/1901
- Start date: 01/01/2002
- Appraisal Date: 30/10/2009
- Status: ApprovedAPVD
- Implementing Agency: HELIOS INVESTMENT PARTNERS (HELIOS II)
- Location: MULTINATIONAL
Helios Investors II, L.P. ("Helios II") is a 10 year fund which will focus on an average of 6 to 8 large platform transactions. It will seek to acquire
(i) controlling stakes in nascent but fast-growing businesses
(ii) significant governance rights in publicly traded companies, and
(iii) leveraged buyouts of established businesses, with a preference for divisions of Western multinational companies. The fund is being formed by Helios Investment Partners, an investment firm founded in 2004 by a predominantly African team, which gathers a collective 186 years of private equity experience from leading firms like Texas Pacific Group, JP Morgan, Goldman Sachs, Terra Firma and Merrill Lynch. To date, the firm first fund reached a net IRR of 33% and a multiple of invested capital of 1.6 x. Helios Investment Partners also successfully managed Modern Africa Fund portfolio which generated a capital multiple of 2,5x and a gross IRR of 50%. The target fund size is USD 500-600 million to be achieved in a series of rolling closings. The fund held its dry first close on USD 175 million with contributions from both new and existing LPs comprising CDC ( USD 75M) and IFC (USD 60M). The next round will target an amount of USD 80-100 million, including the Bank's participation. The Bank will provide an equity investment of USD 30 million with a membership at the Advisory Committee and priority co-investment rights. The Bank will also help the fund to design and implement a development outcome measurement system. The fund will be mainly active in Nigeria, Ghana, Kenya, Angola, South Africa, C
This proposal fits within the counter-cyclical role the Bank has been playing since the start of the economic downturn in 2008. Furthermore, this investment will be aligned to PSO Equity Investment Strategy (Nov. 2008) which emphasizes support to indigenous fund management teams and development of co-investment opportunities. As demonstrated by current co-investment prospects in telecommunications and railways, the Bank will substantially contribute to match the financing needs of the fund's large and complex projects. The projected IRR is 25% based on fairly conservative projections. The positive outlook on the fund future performance is supported by past performance of Helios Investors I and MAF. Investors will receive a preferred return of 8%, and 80% of profit surplus (carried interest). GP contribution will reach 1% of total commitments and the fund manager will charge the fund 2% in management fees. Main risks include the impact of the current crisis on business bottom line and the restricted number of investments which limit diversification. These risks should be partly mitigated by the proven ability of the fund manager to create value with scalable platforms and excellence in investment monitoring. IFC and CDC participation in Helios' first fund helped the firm to set strict standards for development outcome measurement by tracking the record of IFC performance standards and ESG principles in the portfolio. Currently the fund, which is 100% invested in Africa, does not have an African based investor. The participation of the first truly African financial institution in the fund will lower the risk perception residing with some private sector investors especially US High Net Worth individuals.
Economic Performance The Helios II investment thesis targets sectors that are core to the functioning of the economy. It is biased towards domestic markets, offering products and pricing that materially benefit to the consumers. An overall analysis of Fund I indicates that Helios investment in Equity Bank and HTN have contributed to a broader coverage of the previously unbanked active workers. It also points out to the positive impact of increased competition in the target industries (banking in Kenya, telecommunications in Nigeria) on price control. Helios II investments will also contribute to strengthen their portfolio companies balance sheets, thereby encouraging lending from local and international banks.
Environmental Effects Helios has devoted substantial financial and human resources to ensure compliance to high Environmental, Social and Governance standards. Helios Social and Environmental Management System (SEMS) is based on a set of five guiding Business principles, a list of Specific exclusions, a series of Business Policies addressing key areas of Health, Safety, Social, Environmental and Governance (HSEG) areas. Furthermore, the Helios SEMS Framework ensures that the set of guiding principles are fully integrated into the transaction lifecycle and constantly monitored from pre-Investment Committee (IC) screening to exit. The design and implementation of a satisfactory SEMS was a precondition to CDC and IFC participation in the second fund. To review the Fund I compliance to ESG standards, Helios commissioned the consulting firm Arthur D. Little to carry out an assessment of the fund four portfolio companies. The report, which was submitted to the Bank as part of the due diligence process states there was no evidence of deviation of Helios from its Business principles and that shortfalls were addressed by management team (both of the fund and the portfolio companies) with willingness to address their ESG responsibilities. In its current shape, Helios SEMS provides a good benchmark to assess the quality of SEMS of future funds. In the framework of its Additionality and Development Outcomes Assessment (ADOA), the fund managers carried out a detailed review of the Bank's main indicators development outcomes indicators. They have assured our team that these indicators will be used to track development outcomes during the fund life, with the support of Arthur D. Little consulting firm.
Gender and Social EffectsHelios Business social policy looks at enforcing employees' fair treatment, non-discriminative practices in recruitment, and progression and work conditions at Portfolio Company's level. Helios Fund II will set target of women employment of 30% at portfolio company level in the first level, rising to 40% at year five of which 10% should be in managerial positions. One of Helios portfolio companies, Equity Bank, designed women specific products, some being elaborated in collaboration with UNDP. All portfolio companies include specific dispositions on maternity leave and anti-harassment code of conduct.
Private Sector Development and Demonstration Effect Helios has already had a strong private sector development impact through Fund I. It is expected that it will do so with their second Fund.. The majority of Helios II pipeline is addressing the creation of innovative products such as electronic payment instruments and will take the lead in corporate citizenship with the use of business tools to promote public health campaign (outdoor adverting campaigns) and fair trade practices in agribusiness (groundnut oil factory).
Effects on GovernmentsHelios Fund I portfolio companies tax payment to governments is expected to reach an amount of USD 830 Million over the Fund life.
Infrastructure Helios first fund has been fully invested into the banking and telecommunication infrastructure. A majority of projects in Helios II pipeline are in transportation, telecommunications, power, banking or equipment financing. Investing in infrastructure is central to Helios Fund I and II investment thesis centered on sectors that are central to the functioning of the economy.
Effects on Macroeconomic ResilienceDuring the economic downturn, the foreign direct investment (FDI) flows decreased for emerging markets. Major multinationals started selling high quality assets that only well capitalized local buyers are able to purchase. One of Helios Investors II intention is to partially make up for the gap created by these decreasing FDI flows by purchasing these high quality assets that are on sale, potentially at discounted prices. Helios is one of the few local players that can take over from business majors. Furthermore, investments in Infrastructure, central to Helios thesis, strengthen resilience to external shocks.
AKINWUMI Emmanuel Ibituase - PINS2