Canada-based Fairfax Africa Holdings Corporation has agreed to merge with Helios Holdings Limited, an Africa-focused private equity firm, in a transaction that is expected to create a giant pan-African money manager and investment firm, the companies said in a statement Friday.
The new entity, Helios Fairfax Partners Corp., will be listed in Toronto with the majority stake owned by Fairfax. Tope Lawani and Babatunde Soyoye, co-founders of Helios Investment Partners LLP, will run the new group as joint chief executive officers.
Detailed financial terms of the deal were not revealed, but Helios shareholders will gain a 45.9 percent stake and voting interest in Fairfax Africa. In return, Helios will contribute fees from its existing and future funds and act as the new company’s sole investment adviser, establishing one of the biggest Africa-focused asset management firms.
“This combination creates the pre-eminent pan-African investment platform, bringing together the complementary strengths of our respective expertise, cultures, and people, in an attractive permanent capital vehicle,” said Michael Wilkerson, chief executive officer of Fairfax Africa, who will become the executive vice-chairman of the new company.
The new firm will have a larger capital base for diversified investment inflows to the continent through years of experience in third-party investment management operations and the support of longer-term institutional shareholders, they said. The deal still needs to be formally approved by Fairfax Africa shareholders with reports suggesting majority shareholders have already agreed to vote in favor.
Reports indicate the merger came together after Fairfax Financial Chief Prem Watsa met Lawani and Soyoye last year in London. “I looked at the resources they have and the resources we have: They have 40 people, they’re very private-equity oriented, and have done tremendous deals. We didn’t have that expertise [in Africa],” Watsa said. “With Fairfax India, we have 35 years of experience, we know a ton of people there. In Africa, we didn’t.”
The Helios transaction will usher in a major restructuring of operations at Fairfax Africa, a company launched in 2016 by Fairfax Financial to invest in equity and debt of African companies, both public and private. The regional unit has struggled with weak growth in key markets and poor stock market performance by the two publicly traded companies in its portfolio – it reported roughly $60 million net losses in both 2018 and 2019, reports show.
With Helios’ management team making the investment decisions, the deal will move Fairfax away from a traditional investment fund model, where it is valued based on the assets on its balance sheet, to more of an asset-management model where it will generate revenue from managing third-party money while also making its own strategic investments.
Meanwhile, the transaction helps diversify Helios’ funding sources and gives it a pool of permanent capital to invest alongside its private equity funds, according to Lawani, who co-founded the firm in 2004 and have since launched four Africa-focused private equity and debt funds with around $3.6 billion under management.
Fairfax Africa’s existing portfolio contains several troubled investments but the team is well-placed to get these companies back on track, Lawani said. “We think the [Fairfax Africa] team has the right plan, and we think the challenges have just been the execution of those plans. And so with our, candidly, greater connectedness and literal proximity to the markets, we think we can actually be quite helpful.”
Helios has been raising third-party private capital for many years to invest on the continent, backing companies such as Helios Towers Plc and Vivo Energy Plc, that went on to list in London as well as First City Monument Bank (which it exited in 2013), and Interswitch.