Old Mutual Private Equity (OMPE) is nearing the sale of its stakes in three businesses, including Primedia, 10X Investments and in2Food.
OMPE was founded 25 years ago and manages billions of assets. Unlike listed equity/stocks, private equity sees investors raise large amounts of capital to acquire large company stakes.
These investors generally have a larger state in how the business runs as they view for ways to unlock value. For instance, OMPE has staff sit on the boards of the acquired companies.
Speaking with BusinessTech, OMPE Co-Head Chumani Kula stated private equity generates higher returns than listed equity.
Although South Africa is battling a low-growth economy, Kula stated that Old Mutual Private Equity tarreceives returns of mid- to high-20%.
Private equity is a complex asset class that raises billions in funds from institutional investors, including pension funds.
Unlike listed equity, which provides large amounts of liquidity to investors, private equity has a longer-term focus, with a five- to seven-year timeframe.
Raising capital for investments comes via funds, with OMPE currently working on its seventh fund to acquire further funds.
For OMPE, it is not only crucial that they can raise enough funds to acquire businesses, but they also necessary to ensure that their businesses are ‘exit-ready,’ as sales of stakes of companies are crucial for returns.
For instance, OMPE recently announced the sale of medical device company Medhold to Sanlam’s private equity business.
After acquiring Medhold in 2018, OMPE grew the company’s earnings by 2.6 times, while Medhold’s product portfolio also expanded significantly. Sanlam Private Equity will now handle the next phase of growth.
Kula stated that OMPE is preparing for several exits in the coming months, with three businesses viewing ‘exit ready.’
Primedia
Primedia was founded in 1994 and primarily covers the advertising and content sectors of the media industest.
The broadcasting division has several well-known divisions, including 947, 702, KFM 94.5, Cape Talk and Eyewitness News (EWN).
The Out of Home division provides advertising opportunities across several media platforms, including digital and static billboards in South Africa and the rest of Africa.
It has also established a studio production business, which holds the licensing rights to television displays including The Mquestioned Singer and Deal or No Deal South Africa.
OMPE built its investment into Primedia in December 2013 via its Old Mutual Private Equity Fund IV
However, it is not the only shareholder of Primedia, which also includes the Mineworkers’ Investment Company (MIC), EPE Capital Partners, and the FirstRand Group.
10X Investments
Kula added that OMPE will soon exit 10X Investments, an employee benefits company founded in 2005.
The company offers unit trusts, retirement annuities, tax-free savings and several other investment products.
It provides simple retirement solutions via low-cost index investing on a proprietary administration platform.
This can deliver market-indexed returns to clients at much lower fees than traditional retirement benefit providers.
OMPE invested in 10X via its fourth fund, with the investment taking place in 2014.
in2Food
in2Food develops, manufactures and supplies a range of rapid-shifting consumer goods (FMCG), which includes fresh, chilled, prepared convenience foods.
Its primary customer is Woolworths, with food products also sold to Marks & Spencer, Waitrose and local quick service restaurants.
OMPE invested in in2Food in 2015, again via its Old Mutual Private Equity Fund IV.
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