ECP sees 3x return on African bank exit

Washington DC-based Emerging Capital Partners has completed the latest of a series of profitable exits from its pioneering African investment program.

Emerging Capital Partners, a Washington DC-based private equity firm that focuses on investments on the African continent, announced today the sale of its stake in Ecobank Transnational, a regional bank that operates in 18 West and Central African countries. The stake was sold for $35.9 million (€27 million), three times the firm’s initial investment of $11.8 million.

The Ecobank position was sold through a UK-based broker, Exotix, following Ecobank’s IPO in September 2006 on the BRVM in Cote d’Ivoire, NSE in Nigeria, and GSE in Ghana.

“It was a very positive experience because it demonstrated that even these small West African markets have considerable liquidity,” said Thomas Gibian, ECP’s chief executive officer.

ECP’s initial investment was made through its EMP Africa Fund II, which made its final close on $523 million in May 2007. Though other firms, including The Carlyle Group, have funds earmarked for North Africa and South Africa, ECP’s is the largest pan-African private equity fund. The fund also holds investments in Continental Reinsurance in Nigeria, and two pan-African banking groups: African Financial Holdings and Intercontinental Bank.

ECP held Ecobank in its portfolio for one year. ECP worked closely with the bank’s management, helping the bank to improve shareholder documentation and governance. ECP also created new lending opportunities for Ecobank by bringing it into contact with companies in its portfolio looking to borrow funds. Nigeria, Ecobank’s most important base of operations, also enacted important banking reforms and deregulation during this time. This, coupled with significant consolidation in the banking sector, helped to strengthen Nigerian banks. But the most important factor behind Ecobank’s rapid price appreciation, Gibian said, was improved liquidity after its listing.

The Ecobank sale is Fund II’s first exit. Investments through its predecessor, the AIG Africa Infrastructure Fund, have also yielded a number of profitable exits. ECP sold its stake in Sokhna Port Development Company in Egypt for a 54 percent internal rate of return, and its stake in NCT Necotrans for a 22 percent internal rate of return, among others. To date, ECP has 18 exits across its Africa portfolio. The firm has returned over $600 million to its investors, and has averaged 3x money across those 18 realizations.

Gibian said that this type of track record plays a large role in helping to raise limited partners’ enthusiasm for African funds.

“It’s exactly these kinds of transactions that build the track record and create the evidence that Africa is open to investment, and in particular to private equity as an asset class,” Gibian said.