ECP acquires Algerian insurance company for $15m

The Africa-focussed private equity firm has purchased Générale Assurance Méditerranéenne; ECP has also sold its minority stake in a Moroccan fertilizer distribution company for $23 million.

Emerging Capital Partners, a Washington, DC-based private equity firm focussed on investment across the African continent, has acquired Algerian insurance company Générale Assurance Méditerranéenne (GAM) in a $14.8 million (€9.6 million), all-equity transaction.

“Algeria is one of our target countries on the continent,” said ECP executive vice president Vincent Le Guennou told PEO. “[The country is] transitioning from a socialist type of economy to a market oriented economy.”

The country’s insurance sector currently consists of approximately 12 state-owned companies and up to six private companies, Le Guennou said. Insurance penetration is extremely low at less than 1.5 percent compared with 5 percent in Morocco, 13 percent in South Africa and approximately 25 percent in developed markets. Attracted to the growth potential of the insurance sector, ECP said GAM was the only private target providing an opportunity to acquire full control.

Vincent Le Guennou

Le Guennou said full control was essential for ECP to put its own management in place and develop its own business development strategy. ECP has reinforced GAM’s management team, hiring a new chief executive officer, chief financial officer and technical director.

ECP plans to develop GAM over the next three to five years, according to Le Guennou, including helping GAM rebalance its portfolio. The company will move from its current weighting towards transportation insurance into “value added products”. Areas for growth include the underdeveloped life insurance sector and oil and gas. Oil and gas is an interesting sector due to Algeria’s significant reserves of natural gas, said ECP chief operating officer Hurley Doddy.

GAM will also pursue acquisition targets, said Le Guennou. ECP and GAM are now “in discussions with one or two of them” in regards to potential acquisitions.

The company may also consider taking advantage of neighbouring markets and expand from a domestic to a regional focus. Currently, the region only has domestic insurance companies, largely due to the political environment, which would make this a new strategy in North Africa, according to Le Guennou.

“[GAM will] become an appropriate point of entry for international companies looking to expand into Algeria in the future,” said Le Guennou in regards to ECP’s potential exit strategy.

The investment was made through ECP’s Africa Fund II, which closed on $523 million in May 2007. Other investments from the fund include a control position in Nigerian reinsurance company Continental Reinsurance in January 2007. Continental Reinsurance listed on the Nigerian Stock Exchange in May 2007.

ECP has also exited its 38 percent stake in Moroccan fertilizer distribution company Charaf Corporation through a sale of shares to the company’s historical shareholder for total proceeds of $23.2 million. The growth opportunity stemming from the de-regulation of the industry and Morocco’s substantial agricultural sector attracted ECP to Charaf. The initial investment was made through the AIG African infrastructure fund in December 2003. Since 2003, Charaf has seen a 25 percent annual increase in sales. The AIG African Infrastructure Fund closed on $407 million in March 2000.