Wrap Text
Intention to float announcement
EPE Capital Partners Ltd
(Incorporated in the Republic of Mauritius)
(Registration number C138883 C1/GBL)
JSE share code: EPE ISIN: MU0522S00005
INTENTION TO FLOAT ANNOUNCEMENT
NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN OR INTO ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.
ETHOS CAPITAL ANNOUNCES ITS INTENTION TO FLOAT ON THE JSE MAIN BOARD
EPE Capital Partners Ltd (the “Company” or “Ethos Capital”) has today announced its intention to list its
issued A ordinary share capital on the main board of the securities exchange operated by the JSE Limited
(the “JSE”), subject to market conditions and the requisite approvals by the JSE (the “Listing”).
Ethos Capital will list as an investment entity in the “Financials – Speciality Finance” sector of the JSE
and will offer investors long-term capital appreciation by investing, directly and indirectly, in a diversified
portfolio of unlisted investments managed by Ethos Private Equity (Proprietary) Limited (“Ethos Private
Equity”), the largest private equity firm in sub-Saharan Africa.
Ethos Capital is looking to raise up to R2 billion and plans to issue up to 200 million A ordinary shares to
selected and institutional investors in terms of a private placement (the “Offer”). A pre-listing statement
including full details of the Offer and Listing will be made available in due course ("Pre-listing
Statement"). Commitments of approximately R1.076 billion in aggregate have been received from
selected investors, including Ethos Private Equity.
The main purpose of the Offer and the Listing is to:
• raise capital to enable Ethos Capital to implement its Investment Strategy (as outlined below); and
• provide a liquid access point to enable public market investors to obtain an exposure to a
diversified pool of unlisted assets and participate in Ethos Capital’s long-term growth prospects.
Peter Hayward-Butt, Chief Executive Officer of Ethos Capital, said:
“We are progressing our plans to list Ethos Capital on the JSE. The listing will provide the market
with a unique opportunity to invest in a diverse pool of unlisted small to medium-sized companies
in funds managed by the Ethos Private Equity, the largest private equity player in sub-Saharan
Africa.”
“Ethos Private Equity’s historical performance has consistently outperformed the listed
benchmarks with 57% of its 91 realised investments having returned greater than three times the
original invested capital, and 93% of realised investments having returned greater than twice the
capital invested.”
It is anticipated that the net proceeds from the Listing will be invested in the following strategies
(“Investment Strategy”):
• Primary Investments: commitments to various funds to be raised and managed by Ethos Private
Equity (“Ethos Funds”) during their respective fund-raising processes;
• Secondary Investments: acquisitions of existing Limited Partner interests in existing Ethos Funds;
• Direct Investments: acquisitions of interests in underlying investee companies alongside Ethos
Funds to the extent that the Ethos Funds require co-investors in the underlying investee
companies; and
• Temporary Investments: investments in a portfolio of low-risk, liquid debt instruments (including
South African government bonds and other similar, low-risk, liquid instruments) for cash
management purposes.
Ethos Private Equity’s long-term success has been a result of institutionalising a set of core
competencies, which underpin its investment approach. This approach has been refined to provide a
flexible strategy, tailored to investing in South African and other sub-Saharan African markets.
Growth is a central principle of Ethos Private Equity’s strategy: value is added by actively transforming the
strategy, operations and finances of investee businesses, striving to make them “best-in-class”. Through
pioneering thought leadership, creativity and innovation, Ethos Private Equity has developed a long track
record of sustainable investor returns. In its 32-year history, Ethos Private Equity has invested in 104
acquisitions of which 91 have been realised, delivering investment returns with a gross realised IRR of
37.4%.
Stuart MacKenzie, Chief Executive Officer of Ethos Private Equity, said:
“We’ve been investing in our franchise over the past five years, with a view to shifting Ethos’
strategic vision from a single-product, pure-play private equity model to become a diversified
alternative asset manager. The Ethos Capital listing, coupled with the launch of new Ethos Funds,
enables the market to access a broad suite of actively-managed funds. It is important to
appreciate that we are not seeking to change our business model but rather to broaden both the
opportunity set we can invest in; and the universe of investors that can access the funds we
manage. We will continue to raise capital from our existing investor base who will invest in our
Funds alongside Ethos Capital."
The current Ethos buyout fund (Ethos Fund VI) is approaching the end of its investment cycle and has a
diversified portfolio and, as such, Ethos Private Equity intends to begin the capital raising process for
Ethos Fund VII during the second half of 2016 or early 2017. Similar to Ethos Fund VI, the objective of
Ethos Fund VII will be to invest in private companies with market-leading positions, an identifiable
competitive advantage, strong cash flows and significant growth potential. This Fund will target
companies with an enterprise value of between R1.5 billion and R7 billion, with investments of between
R450 million and R1.0 billion in each opportunity.
Ethos Private Equity has recently launched the Ethos Mid Market Fund I, chaired by Sonja de Bruyn
Sebotsa, and is in the process of raising capital for this fund. Ethos Mid Market Fund I is a black-owned
private equity vehicle, which will invest in companies with an enterprise value of between R500 million to
R1.5 billion and would seek to invest between R100 million and R350 million in each opportunity. The
focus of the Ethos Mid Market Fund I will be on private equity investments in the mid-market space, co-
investing as the B-BBEE partner alongside other Ethos Funds in certain transactions and benefitting from
facilitated B-BBEE transactions with companies requiring a long-term B-BBEE partner that has capital to
meet growth requirements. Sonja continues her commitments at Identity Partners and leads the
collaboration between Ethos Private Equity and Identity Partners into the future.
Ethos Private Equity has acquired a High Yield and Mezzanine Credit platform and intends to launch a
closed-end mezzanine debt fund dedicated to providing mezzanine and quasi-equity financing solutions
to companies in southern Africa to meet their intermediate capital funding requirements.
On completion of the Offer, Ethos Capital intends to make an initial commitment to Ethos Mid Market
Fund I, Ethos Fund VII and Ethos Mezzanine Fund I. In addition, Ethos Capital is expected to make a
Secondary Investment in Ethos Fund VI.
As the proceeds raised under the Offer will be less than Ethos Capital’s commitments (ie, Ethos Capital
will be over-committed), Ethos Capital will use the net proceeds of the offer, any realisations from its
investments and access to a debt facility from time to time, in accordance with its investment strategy and
investment pipeline, to meet these commitments, as and when they become due. It is possible, but not
currently contemplated, that Ethos Capital will raise further capital from shareholders in the future, if the
appropriate investment opportunities arise.
The board of independent directors of Ethos Capital (the “Independent Board”) will be chaired by
Yvonne Stillhart and is composed of experienced private equity professionals all of whom are
independent of Ethos Private Equity. Ethos Capital’s investment committee will comprise non-executive
directors Michael Pfaff and Derek Prout-Jones who have significant experience in the private equity
industry. The investment committee will review investment opportunities and make recommendations to
the Board who will make the ultimate investment decision. The two non-executive directors on the
Investment Committee have made commitments in the Offer, which equate to 6.48%, assuming the Offer
is fully subscribed.
Peter Hayward-Butt added:
“Ethos Capital’s non-executive board has an extensive understanding of, and significant
experience in, the private equity industry and will apply this experience in order to make optimal
investment decisions for the Company.
“Ethos Capital has been set up to provide investors with the opportunity to build a long-term
investment relationship with Ethos Private Equity. Significant care has been taken to ensure that
the interests of Ethos Capital shareholders and those of Ethos Private Equity are aligned for the
long-term and to ensure that there are no “fees on fees” in the structure. To strengthen the
alignment of interests, Ethos Private Equity will acquire 5% of the A shares over time.”
In South Africa, the Offer is only being made to the selected and institutional investors referred to above
on the terms and conditions set out in the Pre-listing Statement. Prospective investors may contact their
professional advisers and/or brokers in relation to the eligibility requirements for participation in the Offer.
Rand Merchant Bank, a division of FirstRand Bank Limited (“RMB”) is acting as the financial adviser,
sole global coordinator, bookrunner and JSE sponsor in relation to the Listing.
Johannesburg
18 July 2016
Enquiries:
Ethos Capital
Chelsea Wilkinson, Head of Corporate Relations
SA: Direct: +27 11 328 7463
www.ethoscapital.mu
Rand Merchant Bank
Irshaad Paruk, Head of Equity Capital Markets
SA: Direct: +27 11 282 1853
Instinctif
Morné Reinders
SA: +27 82 325 1810
Financial adviser, sole global coordinator, bookrunner and sponsor
Rand Merchant Bank, a division of FirstRand Bank Limited
18 July 2016
NOTE TO EDITORS
Overview and highlights of the Ethos Capital investment proposition
Ethos Capital is an investment entity incorporated as a public company under the laws of Mauritius.
Ethos Capital holds a Category One Global Business Licence issued by the Financial Services
Commission Mauritius. It is designed to offer investors long-term capital appreciation by investing, directly
and indirectly, in a diversified portfolio of unlisted private equity type investments. Ethos Capital's
investments will be sourced by Ethos Private Equity, as investment adviser, the largest private equity firm
in sub-Saharan Africa, which has a proven track record of delivering investment returns with a gross
realised IRR of 37.4% over a period of more than 30 years.
The Ethos Capital investment proposition is based on:
• Unique access point: the opportunity to invest into Ethos Funds and co-invest alongside Ethos
Private Equity through a liquid and efficient vehicle listed on the JSE and governed by an
independent board of directors including experienced private equity non-executive directors is
unique.
• Demonstrated performance: Ethos Private Equity - the largest private equity firm in sub-Saharan
Africa - has an established private equity investment track record, having generated investment
returns with a gross realised IRR of 37.4% over a period of more than 30 years. Ethos Capital will
have the ability to leverage off Ethos Private Equity's investment platform and share in its success.
• Diversification: Ethos Capital provides public-market investors with a liquid vehicle to indirectly
access a diversified pool of unlisted small- to mid-sized companies through equity or equity-like
instruments, which will be actively sourced by Ethos Private Equity to optimise investor returns.
• Alignment of interests: strong economic alignment with Ethos Private Equity, the investment
adviser, to Ethos Capital, through a significant investment by Ethos Private Equity in
Ethos Capital’s A ordinary shares.
• Experienced private equity non-executive directors: the Board has an extensive understanding
of, and a long track record in, the private equity industry and will leverage this experience in order
to make optimal investment decisions for Ethos Capital. The Chairperson of Ethos Capital is
Yvonne Stillhart. She has extensive experience in private equity investing including leading,
structuring, negotiating, executing and managing private equity investments (including exits and
restructurings). She is the independent non-executive Chairperson of the board of directors and
finance committee of Akina Ltd, an AIFM (alternative investment fund manager) private equity
manager investing in Europe. Previously, she was a co-founding Senior Partner and member of the
investment committee responsible for Akina AG, Zurich with approximately CHF 2 billion assets
under management.
• Structural efficiency: Ethos Capital conducts its business operations from Mauritius because of
the business-friendly environment, the spread of tax treaties that Mauritius has with many, but not
all, of the jurisdictions that Ethos Capital will invest in and its acceptance among global investors as
an investment jurisdiction. This, combined with Ethos Private Equity's fee structure, which is
structured so as to ensure that there are no "fees on fees", which achieves an alignment of
interests between Ethos Private Equity and shareholders, gives structural efficiency to
Ethos Capital and ensures that the structure is fiscally transparent.
• Liquidity management: Ethos Capital will actively manage liquidity in the best interests of its
shareholders. As part of its liquidity strategy, the Board is committed to strategies to enhance the
net asset value (“NAV”) per A ordinary share, which will include the potential repurchase of
A ordinary shares should the price per A ordinary share trade at a discount to the prevailing total
NAV per A ordinary share for a period of time. Any repurchase strategy implemented by the Board
will take into account Ethos Capital’s liquidity requirements and its fund commitments, and will (to
the extent implemented) initially only be implemented until Ethos Capital has invested 75% of the
proceeds raised in the Offer. Post this, the Board will reconsider whether this repurchase strategy
remains in the best interests of shareholders.
Key considerations for investors in Ethos Capital
Key matters Considerations
Mandate • Ethos Capital will participate in the following:
1. Commitments to new Ethos Funds launched by
Ethos Private Equity
2. Secondary buy-outs of Ethos Fund Limited Partners (“LP”)
3. Direct co-investment opportunities alongside Ethos
Funds
Governance • The Board will comprise 5 independent non-executive
directors; 2 of the non-executive directors (Michael Pfaff
and Derek Prout-Jones) will constitute the Investment
Committee that will review investment opportunities and
make recommendations to the Ethos Capital Board who
will review the recommendations and make the ultimate
investment decision
• The non-executives directors will receive director’s fees
and, to ensure alignment, the Investment Committee non-
executive directors will also invest in a leveraged equity
investment into Ethos Capital
• The contractual protections in the Limited Partner
Agreements will govern the conduct of the Managers of
the underlying Funds
Fees & alignment of interests • Ethos Capital will have a separate fee arrangement to
ensure that there are no “fees on fees”
• Annual management fee of 1.5% of Invested Net Asset
value and 0.25% on cash balances
• Annual performance participation of 20% of growth in
invested NAV subject to achieving a 10% hurdle
• A 3 year high water mark structure
• Ethos Private Equity will acquire 1% of the A ordinary
shares on listing and will commit c.1% of commitments to
the underlying Ethos Funds
• No performance participation will be paid in cash
(effectively paid as A ordinary shares) until Ethos Private
Equity has earned in a total of 4% of Ethos Capital
Valuation methodology • Portfolio company valuations will be based on
International Private Equity and Venture Capital Valuation
(“IPEV”) guidelines
• Valuations audited bi-annually and approved by each
Ethos Fund’s advisory board comprising Fund LPs
(including Ethos Capital)
• Valuation reporting for Ethos Capital on a quarterly basis
Investment profile & liquidity • Ethos Capital will follow an “over commitment” strategy to
limit potential cash drag with active liquidity and
investment management by Ethos Capital executives
reviewed by the Investment Committee directors
• Liquidity facility of R500 – R750 million for Ethos Capital
utilised to invest in assets and optimise return on equity
(“ROE”)
Overview of the Ethos Capital investment structure
Ethos Capital's investment objective is to develop a diversified portfolio of investments that will provide its
shareholders with superior long-term returns by leveraging Ethos Private Equity's active management
model to maximise investor returns. Ethos Capital will focus on Primary Investments, Secondary
Investments and Direct Investments.
Ethos Capital will be managed and controlled from Mauritius. The affairs of the Company will be governed
by an experienced, independent Board, comprising two independent, Mauritian resident directors and a
majority of directors from outside of South Africa. The Board has an understanding of, and a long track
record in, the private equity industry and will be responsible for making all of the investment decisions for
Ethos Capital. Accordingly, the Board has sufficient and satisfactory experience in the management of the
types of investments into which Ethos Capital proposes to invest. Initially, this will include evaluating
proposals received from Ethos Private Equity, as the investment adviser, and recommendations made by
the Investment Committee and analysing and deciding on initial investments into Ethos Funds, analysing
potential co-investment opportunities and investing a portion of the proceeds of the Offer in Temporary
Investments for cash management purposes in accordance with the Investment Strategy. Ethos Capital
has entered into an investment services agreement with Ethos Private Equity in terms of which Ethos
Private Equity, as investment adviser, will provide investment advice (including sourcing investments),
administrative and back-office services to Ethos Capital.
The organogram can be viewed on the Company’s website, www.ethoscapital.mu, and on the press
version of this announcement.
Note:
1. All fees are payable to Ethos Private Equity, the EPE Trust or fund managers wholly owned by Ethos Private Equity with the
exception of the Ethos Mid Market Fund I manager, which is owned 51% by black executives and 49% by Ethos Private Equity.
Ethos Capital's Investment Strategy
Ethos Capital will obtain exposure to a diversified pool of unlisted assets. This exposure will be achieved
through the following investment strategies, which are the primary lines of business of Ethos Capital:
• Primary Investments: consisting of commitments to various Ethos Funds (whether directly or
through other intermediate holding entities) during their respective fund-raising processes;
• Secondary Investments: acquisitions (whether directly or through other intermediate holding
entities) of existing LP interests in various Ethos Funds;
• Direct Investments: acquisitions of interests in underlying investee companies from Ethos Funds
and/or acquisitions of interests in underlying investee companies (whether directly or through other
intermediate holding entities) alongside Ethos Funds to the extent that the Ethos Funds require co-
investors in the underlying investee companies; and
• Temporary Investments: Ethos Capital will also make temporary investments in a portfolio of low-
risk, liquid debt instruments (including, inter alia, South African government bonds and other similar,
low-risk, liquid instruments) for cash management purposes, as appropriate.
It is likely that Ethos Capital will invest the majority of its capital in Primary Investments and Secondary
Investments, with a maximum of 30% of Ethos Capital’s NAV (based on the latest quarterly NAV
valuation) being invested in Direct Investments at the time that any such Direct Investment is approved by
the Board.
On completion of the Offer, Ethos Capital intends to make an initial commitment to Ethos Mid Market
Fund I, Ethos Fund VII and Ethos Mezzanine Fund. On completion of the Offer, Ethos Capital is also
expected to make a Secondary Investment in Ethos Fund VI. Ethos Private Equity has sourced and
proposed these investment commitments to the Investment Committee, which subsequently analysed and
recommended these investment commitments to the Board, in accordance with Ethos Capital's
Investment Strategy. The Board has analysed the recommendation of the Investment Committee and
approved these investment commitments. Pursuant to the Investment Strategy, Ethos Capital will
continue to make investments in and alongside existing and future Ethos Funds.
As the proceeds raised under the Offer will be less than Ethos Capital's contemplated commitments (i.e.,
Ethos Capital will be over-committed), it is therefore contemplated that Ethos Capital will use the net
proceeds of the Offer, any proceeds from its Primary Investments, Secondary Investments, Direct
Investments, Temporary Investments and/or the funds available to it under the R500 - R700 million
liquidity facility it will have in place on Listing, from time to time, in accordance with its Investment
Strategy and investment pipeline, to meet these commitments, as and when they become due. It is the
intention, although not currently contemplated, that Ethos Capital will raise further capital from
shareholders in the future if the appropriate investment opportunities exist.
As at the date of this announcement, Ethos Capital has not made, and, on the Listing date, Ethos Capital
will not have made, any firm commitments to make any investment. There is also no certainty that Ethos
Capital will be able to make the intended investments outlined above. The contemplated Secondary
Investment in Ethos Fund VI is, for example, subject to one or more of the existing Limited Partners in
Ethos Fund VI agreeing to sell their interests in Ethos Fund VI to Ethos Capital.
Ethos Funds that have launched recently or are likely to launch in the near future are detailed below.
Primary Investments
Ethos Fund VII
The current Ethos Fund VI is approaching the end of its investment cycle as a fund and is starting its
realisation phase. As such, Ethos Private Equity intends to begin the capital raising process for Ethos
Fund VII during the second half of 2016 or early 2017. While the target size of Ethos Fund VII is yet to be
determined, it is envisaged to be between R8 billion and R10 billion.
The objective of Ethos Fund VII will be to invest in private companies with market-leading positions, an
identifiable competitive advantage, strong cash flows and significant growth potential. Ethos Fund VII will
target companies with an enterprise value of between R1.5 billion to R7 billion and would seek to invest
between R450 million to R1 billion in each opportunity.
Ethos Fund VII (as is the case with Ethos Fund VI) will be managed by Ethos Private Equity and its
associates. Ethos Fund VII will focus on transactions in both South Africa and other select countries in
sub-Saharan Africa (up to 25% of Ethos Fund VII’s committed capital may be invested in companies
whose primary business activities are located outside of South Africa in sub-Saharan Africa).
If the Offer size is equal to R1.5 billion, Ethos Capital’s intended commitment to Ethos Fund VII is R2
billion, which intended commitment increases on a pro rata basis to R2.5 billion, to the extent that the
Offer size equals R2 billion, subject to Ethos Fund VII being raised. Ethos Capital may increase this
intended commitment to Ethos Fund VII prior to the final close of Ethos Fund VII.
Ethos Mid Market Fund I
Ethos Private Equity has recently launched Ethos Mid Market Fund I and is in the process of raising
capital for this fund. The target capital to be raised for Ethos Mid Market Fund I is R2.5 billion to
R3.0 billion.
Ethos Mid Market Fund I is a black-owned vehicle and its objective is to invest in private companies with
market-leading positions, an identifiable competitive advantage, strong cash flows and significant growth
potential. Ethos Mid Market Fund I will target companies with an enterprise value of between R500 million
to R1.5 billion and would seek to invest between R100 million and R350 million in each opportunity.
The manager of Ethos Mid Market Fund I is Mainstreet 1406 Proprietary Limited (to be renamed Ethos
Mid Market Fund I Proprietary Limited), which is 49% owned by Ethos Private Equity and 51% owned by
the management team of that Fund. 51% of the economic and voting interest of the manager is held by
Black People. The manager will retain Ethos Private Equity to provide it with administrative services in
relation to Ethos Mid Market Fund I.
It is intended that Ethos Mid Market Fund I will be classified as a black person in terms of B-BBEE
legislation. In order to comply with the B-BBEE Codes, Ethos Mid Market Fund I will seek to invest, over
the course of its commitment period, at least 51% of the value of funds under management in companies
that have at least a 25% direct black shareholding (including the shareholding of Ethos Mid Market
Fund I) using the flow through principle (as defined in the B-BBEE Codes).
While the key focus of Ethos Mid Market Fund I is on effecting investments in the mid-market space
(which is expected to account for the majority of Ethos Mid Market Fund I’s capital), it will also co-invest
as the B-BBEE partner alongside other funds (including, without limitation, funds managed by
Ethos Private Equity) in certain transactions and benefit from facilitated B-BBEE transactions with
companies that require a long-term B-BBEE partner that has capital to meet growth requirements.
Ethos Mid Market Fund I will focus on transactions in South Africa and other select countries in sub-
Saharan Africa (up to 25% of Ethos Mid Market Fund I's committed capital may be invested in companies
whose primary business activities are located outside of South Africa in sub-Saharan Africa).
If the Offer size is equal to R1.5 billion, Ethos Capital's intended commitment to Ethos Mid Market Fund I
is R750 million, which intended commitment increases on a pro rata basis to R1 billion, to the extent that
the Offer size equals R2 billion, subject to the Fund being raised. Ethos Capital intends to commit R550
million upon first close of the Fund and a further R450 million, (this additional commitment being subject
to Ethos Capital's commitment not exceeding 50% of the total commitments received by the Ethos Mid
Market Fund I) on final close. Ethos Capital may increase this intended commitment to Ethos Mid Market
Fund I prior to the final close of Ethos Mid Market Fund I.
Ethos Fund VI has been warehousing approximately R500 million of B-BBEE assets. Subject to approval
by the relevant advisory boards, Ethos Mid Market Fund I intends to acquire the B-BBEE assets from
Ethos Fund VI. To the extent that this acquisition of the B-BBEE assets is concluded, Ethos Capital, as an
intended first close investor in Ethos Mid Market Fund I, will earn the higher of i) Prime Rate plus 2% or ii)
the growth in net asset value of the B-BBEE assets from the date of the acquisition to the date of the final
close of Ethos Mid Market Fund I.
Ethos Mezzanine Fund
Ethos Mezzanine Fund will invest in mezzanine financial instruments including, inter alia, second lien
loans, convertible loans, payment-in-kind notes and preference shares. Ethos Mezzanine Fund will target
market-leading companies with a sustainable competitive advantage and/or critical success factors with
proven track record of sufficiently predictable free cash flow to service debt and experienced
management teams.
Ethos Mezzanine Fund will focus on transactions in South Africa and other select countries in sub-
Saharan Africa (up to 30% of Ethos Mezzanine Fund's committed capital may be invested in companies
whose primary business activities are located outside of South Africa in sub-Saharan Africa).
If the Offer size is equal to R1.5 billion, Ethos Capital's intended commitment to Ethos Mezzanine Fund is
R200 million, which intended commitment increases on a pro rata basis to R400 million, to the extent that
the Offer size equals R2 billion, subject to Ethos Mezzanine Fund being raised and Ethos Capital's
commitment not exceeding 33% of the total commitments received by Ethos Mezzanine Fund on final
close. Ethos Capital may increase this intended commitment to Ethos Mezzanine Fund prior to the final
close of Ethos Mezzanine Fund.
Secondary Investments
Ethos Fund VI
The current Ethos Fund VI is coming to the end of its investment cycle and is starting its realisation
phase.
The objective of Ethos Fund VI is to invest in private companies with market-leading positions, an
identifiable competitive advantage, strong cash flows and significant growth potential. Ethos Fund VI
targeted companies with an enterprise value of between R1 billion to R5 billion and sought to invest
between R350 million to R1 billion in each opportunity.
Ethos Fund VI is managed by Ethos Private Equity and its associates. Ethos Fund VI focuses on
transactions in both South Africa and other select countries in sub-Saharan Africa (up to 20% of Ethos
Fund VI’s committed capital may be invested in sub-Saharan Africa).
Ethos Capital intends to invest R600 million in Secondary Investments, namely in Ethos Fund VI.
Ethos Capital may make an offer to purchase Limited Partner interests in Ethos Fund VI from existing
Ethos Fund VI Limited Partners post Listing.
Temporary Investments
Pursuant to its strategy of active liquidity management, Ethos Capital's surplus cash (in excess of
investment and short term liquidity requirements) will be invested in a portfolio of Temporary Investments.
This portfolio will be managed by Ashburton Fund Managers Proprietary Limited on behalf of
Ethos Capital. The Administration Fee of 0.25% on Temporary Investments payable to Ethos Private
Equity will cover Ashburton Fund Managers Proprietary Limited’s management costs in relation to the
Temporary Investments.
Overview of Ethos Private Equity
Ethos Private Equity, the investment adviser, was founded in 1984 and has an established track record of
investing in private equity transactions in South Africa and other sub-Saharan African countries. Ethos
Private Equity targets control buyouts and selected expansion capital investments in companies with
strong growth potential.
Ethos Private Equity employs 61 members of staff, including 15 partners, which makes it the largest
private equity firm in sub-Saharan Africa. An institutionalised approach to investing, world-class
governance, extensive origination networks and an experienced investment team provide Ethos Private
Equity with a competitive advantage in the sub-Saharan private equity market.
Ethos Private Equity seeks to leverage its understanding of the South African and sub-Saharan African
markets to target small- to mid-sized companies best positioned to benefit from the region’s unique
growth dynamics. As an active investor, Ethos Private Equity has capitalised on its experience of owning
businesses across a variety of investment, economic and political cycles to maximise value post-
investment and generate superior returns.
Ethos Private Equity has recently launched Ethos Mid Market Fund I and is in the process of raising
capital for this fund. Ethos Mid Market Fund I is a black-owned vehicle and its objective is to invest in
private companies with market-leading positions, identifiable competitive advantage, strong cash flows
and significant growth potential. While the key focus of Ethos Mid Market Fund I is on effecting
investments in the mid-market space (which is expected to account for the majority of Ethos Mid Market
Fund I’s capital), it will also co-invest as the B-BBEE partner alongside other Ethos Funds in certain
transactions and benefit from facilitated B-BBEE transactions with companies that require a long-term B-
BBEE partner that has capital to meet growth requirements.
Ethos Private Equity’s track record
Ethos Private Equity has an established track record, including:
• implementing 104 transactions since 1984, investing over R10.3 billion during this period;
• successfully realising 91 investments, generating 37.4% gross Realised IRR and 3.4x multiple of
cost;
• since Ethos Fund III (the first Ethos Fund that attracted international investors), which was raised in
1996, Ethos Private Equity has generated 27.1% gross Realised IRR and a 3.5x multiple of cost;
• global independent investment adviser, RisCura's research shows that realised investments from
Ethos Funds III-V achieved a 32.4% net IRR over a 10-year period, and a 21.3% net IRR over a
20-year period;
• 57% of all realised investments, by capital invested, have returned greater than 3.0x invested
capital; and
• 93% of all realised investments by capital invested have returned greater than 2.0x invested
capital.
Ethos Private Equity has a proven investment strategy, including:
• positioning itself as the lead investor on transactions with control or joint control stakes in the
majority of its deals;
• having an understanding of, and focus on, sub-Saharan Africa, predominantly driven through
expansion of its investee companies;
• implementing a theme-led approach with thorough evaluation of economic drivers and industry
fundamentals; and
• significant hands-on involvement in portfolio companies, leveraging its Value Add capability to
optimise financial and operational performance of its investment companies.
Rand-denominated IRR consistently beating the benchmark, on a fund by fund and pooled basis
Ethos Private Equity has a long track record of investing in private equity transactions. The tables and
charts below demonstrate Ethos Private Equity's investment performance both on a fund-by-fund and
pooled basis, indicating its ability to consistently outperform the listed equity benchmark (and inflation plus
10%) over time:
Gross
Realised IRR Net IRR Listed equity Over / (under)
Vintage Status (%) (%) benchmark performance
Ethos Fund III ... 1996 Fully realised 26.1 21.5 15.7 5.8
Ethos Fund IV .. 1998 Fully realised 28.8 22.1 18.0 4.1
Ethos Fund V ... 2005 Mostly realised 12.4 9.7 12.1 -2.4
Ethos Fund VI .. Investment
2011 phase 18.1 n/a 10.6 n/a
5 10 20
1 year 3 years years years years
Ethos Funds pooled (all investments)(i) ............ nm 15.9% 17.4% 15.5% 17.7%
Ethos Funds pooled (realised investments)(ii) ... 36.2% 45.9% 33.3% 32.4% 21.3%
Inflation + 10% ..................................... 14.8% 15.5% 15.5% 16.2% 16.0%
Listed equity benchmark (iii) ................... 4.4% 10.9% 12.7% 12.4% 15.6%
The graphs can be viewed on the Company’s website www.ethoscapital.mu and on the press version of this announcement.
Note:
(i) Net of management fees and carried interest;
(ii) Net of management fees and carried interest for Fund III and IV; fees in Fund V weighted according to invested
capital of realised investments divided by total invested capital at each date that fees were drawn (Fund VI excluded
as no realisations); and
(iii) Return that would have been achieved by investing fund cash flows into JSE All Share Index, including dividends.
Ethos Private Equity believes its long-term success is due to the unique set of competencies developed
over its 32-year history, which have been institutionalised in its investment philosophy.
Ethos Private Equity's key strengths
Ethos Private Equity's long-term success has been a result of institutionalising a set of core
competencies, developed over decades, which underpin its investment approach. This approach has
been refined to provide a flexible strategy, tailored to investing within the South African and other sub-
Saharan African markets. Growth is a central principle of Ethos Private Equity's strategy: value is added
by actively transforming the strategy, operations and finances of investee businesses, making them "best-
in-class". Through pioneering thought leadership, creativity, and innovation, Ethos Private Equity has
developed a long track record of sustainable, superior investor returns.
Ethos Private Equity represents a unique combination of skill, innovation and stability. The existing
partners have a combined 176 years of private equity experience, of which 155 has been at Ethos Private
Equity. Ethos Private Equity has invested in 104 acquisitions since 1984 of which 91 have been
successfully realised. This unique history has inspired a distinctive approach and driven Ethos Private
Equity's success.
The key strengths of Ethos Private Equity's value proposition include:
• an established track record and excellence in investing;
• a commitment to and alignment with fund investors;
• a unified, high-performance culture and commitment to transformation;
• its broad origination platform and business networks;
• a consistent, disciplined investment process;
• its local presence, commitment to, and focus on, sub-Saharan Africa;
• a flexible, innovative approach to transactions;
• adding value to, and influencing the strategy of, investee companies; and
• the ability to drive value creation through the investment cycle and optimise exits.
The Offer and Listing
Prior to Listing, it is intended that there will be an offer for subscription by private placement of up to 200
million A ordinary shares in Ethos Capital ("Offer Shares") subject to certain conditions, to selected
institutional investors outside the United States in reliance on Regulation S of the US Securities Act and,
separately, to each class of Qualifying Investor in South Africa (being selected institutional investors as
contemplated in section 96(1)(a) of the Companies Act, 2008 or selected persons, acting as principal,
acquiring A ordinary shares for a total acquisition cost of R1,000,000 or more, as contemplated in section
96(1)(b) of the Companies Act, 2008) to whom the Offer will specifically be addressed, and by whom the
Offer will be capable of acceptance.
The gross proceeds from the issue of the Offer Shares receivable by Ethos Capital (including all monies
raised from anchor investors) and in terms of other subscriptions that do not form part of the Offer that will
occur contemporaneous with the Listing, are estimated to be up to R2 billion.
The Offer Shares will represent approximately 88.5% of the issued A ordinary shares of Ethos Capital on
the Listing Date.
A pre-listing statement including full details of the Offer and Listing will be made available in due course.
The main purpose of the Offer and the Listing are to:
• allow investors to participate in the long-term growth associated with investing in private equity
assets, while providing liquidity in the form of a listed security;
• raise cash to enable Ethos Capital to implement its Investment Strategy; and
• provide liquidity of Ethos Capital to enable public-market investors to invest in Ethos Capital and
obtain an exposure to a diversified pool of unlisted assets.
END
DISCLAIMER
This announcement is not directed to, or intended for distribution to or use by, any person or entity that is
a citizen or resident of, or located in, any locality, state, country or other jurisdiction where such
distribution or use would be contrary to law or regulation or which would require any action (including
registration or licensing) within such jurisdiction for such purpose, including the United States of America
(including its territories and possessions, any State of the United States of America and the District of
Columbia) ("United States"), Commonwealth of Australia, Canada or Japan. It is the responsibility of any
person into whose possession this announcement comes to inform themselves about, and observe, any
such applicable legal restrictions. Any failure to comply with any of those restrictions may constitute a
violation of the laws or regulations of any such jurisdiction.
This announcement does not constitute or form part of, and should not be construed as, an
advertisement, invitation, solicitation and/or offer to sell, issue, purchase or subscribe for, any securities
mentioned in this announcement (the “Shares”) in any jurisdiction, or an inducement to enter into
investment activity. There will be no public offer of any securities in any jurisdiction.
The Shares have not been, and will not be, registered under the United States Securities Act of 1933, as
amended (the “Securities Act”). The Shares may not be offered or sold in the United States except
pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the
Securities Act.
This announcement does not constitute, or form a part of, and should not be construed as, an
advertisement, invitation, solicitation and/or offer to sell, issue, purchase or subscribe for, any Shares in
South Africa, including an offer to the public as defined in the South African Companies Act, 71 of 2008,
as amended (the “Companies Act”) or otherwise. This announcement will not be distributed to any person
in South Africa in any manner that could be construed as an offer to the public in terms of the Companies
Act. Accordingly: (i) the Offer is not an offer to the public as contemplated in the Companies Act; (ii) this
announcement does not, nor does it intend to, constitute a “registered prospectus”, as contemplated by
the Companies Act; and (iii) no prospectus has been, or will be, filed with the South African Companies
and Intellectual Property Commission in respect of the Offer.
The information contained in this announcement constitutes factual information as contemplated in
section 1(3)(a) of the South African Financial Advisory and Intermediary Services Act, 37 of 2002, as
amended ("FAIS Act") and should not be construed as an express or implied recommendation, guide or
proposal that any particular transaction in respect of the Shares or in relation to the business or future
investments of Ethos Capital is appropriate to the particular investment objectives, financial situations or
needs of a prospective investor, and nothing in this announcement should be construed as constituting
the canvassing for, or marketing or advertising of, financial services in South Africa. Ethos Capital is not a
financial services provider licensed as such under the FAIS Act.
This announcement does not constitute an offer of securities to the public in the United Kingdom of
England and Wales ("United Kingdom"). This announcement is only being distributed to and is only
directed at: (i) persons who are outside the United Kingdom; or (ii) investment professionals falling within
Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as
amended (“Order”); or (iii) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such
persons together being referred to as “Relevant Persons”). Any investment activity to which this
announcement relates will only be available to, and any invitation, offer or agreement to purchase or
otherwise acquire Shares will only be engaged with, Relevant Persons. Any person who is not a Relevant
Person should not act or rely on this announcement or any of its contents.
Any offer of securities to the public that may be deemed to be made pursuant to this announcement in
any European Economic Area member state that has implemented Directive 2003/71/EC, as amended,
(together with any applicable implementing measures in any member state, the “Prospectus Directive”) is
only addressed to qualified investors in that Member State within the meaning of the Prospectus
Directive.
This announcement contains statements about Ethos Capital, Ethos Private Equity and/or the Ethos
Funds that are or may be forward-looking statements. All statements, other than statements of historical
fact, are, or may be deemed to be, forward-looking statements, including, without limitation, those
concerning: strategy; the economic outlook for the industries in which Ethos Capital intends to invest;
cash costs; operating results, investment prospects, results and performance, return on investment,
realisations, valuations; growth prospects and outlook for investments or funds, individually or in the
aggregate; liquidity, capital resources and expenditure; and the outcome and consequences of any
investment strategy. These forward-looking statements are not based on historical facts, but rather reflect
current expectations concerning future results and events and generally may be identified by the use of
forward-looking words or phrases such as “believe”, “aim”, “expect”, “anticipate”, “intend”, “foresee”,
“forecast”, “likely”, “should”, “planned”, “may”, “estimated”, “potential” or similar words and phrases.
Examples of forward-looking statements include statements regarding a future financial position or future
profits, cash flows, corporate or investment strategy (including proposed investments), future or expected
returns, future realisations, and other economic factors, such as, inter alia, interest and exchange rates.
The forward-looking statements contained in this announcement, include statements relating to the
Primary Investments, Secondary Investments, Direct Investments and Temporary Investments proposed
to be made by Ethos Capital, and the establishment of future Ethos Funds.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events
and depend on circumstances that may or may not occur in the future. Ethos Capital cautions that
forward-looking statements are not guarantees of future performance. Actual results, returns, financial
and operating conditions, liquidity and the developments within the industries in which Ethos Capital
intends to invest may differ materially from those made in, or suggested by, the forward-looking
statements contained in this announcement.
All these forward-looking statements are based on estimates and assumptions, all of which estimates and
assumptions, although Ethos Capital may believe them to be reasonable, are inherently uncertain. Such
estimates, assumptions or statements may not eventuate. Many factors (including factors not yet known
to Ethos Capital, or not currently considered material) could cause the actual results, returns,
performance or achievements of Ethos Capital to be materially different from any future results,
performance or achievements expressed or implied in those estimates, statements or assumptions.
Any forward-looking statement made in this announcement is applicable only at the date on which such
forward-looking statement is made. New factors that could cause the business of Ethos Capital, or other
matters to which such forward-looking statements relate, not to develop as expected may emerge from
time to time, and it is not possible to predict all of them. Further, the extent to which any factor or
combination of factors may cause actual results or matters to differ materially from those contained in any
forward-looking statement are not known. Ethos Capital has no duty, and, save as disclosed in the pre-
listing statement, does not intend, to update or revise the forward-looking statements contained in this
announcement after the date hereof, except as may be required by law.
In considering any performance data contained in this announcement, it should be borne in mind that past
or targeted performance is not indicative of future results, and there can be no assurance that the Ethos
Funds will achieve comparable results or that target returns will be met. In addition, there can be no
assurance that unrealised investments will be realised at the valuations shown as actual. Realised returns
will depend on, among other factors, future operating results, the value of the assets and market
conditions at the time of disposition, any related transaction costs, and the timing and manner of sale, all
of which may differ from the assumptions on which the valuations contained in this announcement are
based. The IRRs presented on a “gross” basis do not reflect any management fees, carried interest, taxes
and allocable expenses borne by investors, which in the aggregate may be substantial. All IRRs
presented are annualised and calculated on the basis of monthly investment inflows and outflows.
Nothing contained in this announcement should be deemed to be a prediction or projection of future
performance of the Ethos Funds.
RMB is acting exclusively for Ethos Capital and no one else in connection with the Offer. It will not regard
any other person (whether or not a recipient of this announcement) as its client in relation to the Offer and
will not be responsible to anyone other than Ethos Capital for providing the protections afforded to its
clients nor for giving advice in relation to the Offer or any transaction or arrangement referred to in this
announcement.
No representation or warranty, express or implied, is made by Ethos Capital, Ethos Private Equity, any
general partner/manager on behalf of Ethos Funds or RMB as to the truth, accuracy, fairness,
completeness (or whether any information has been omitted from the announcement) or verification of the
information set out in this announcement, and nothing contained in this announcement is, or shall be
relied upon as, a promise or representation in this respect, whether as to the past or the future. RMB,
Ethos Private Equity and any general partner/manager on behalf of Ethos Fund assumes no responsibility
for this announcement’s accuracy, completeness or verification and accordingly disclaims, to the fullest
extent permitted by applicable laws and regulations, any and all liability whether arising in delict, tort,
contract or otherwise which it might otherwise be found to have in respect of this announcement or any
such statement.
In connection with the Offer, RMB and any of its affiliates, acting as investors for their own accounts, may
subscribe for or purchase Shares and in that capacity may retain, purchase, sell, offer to sell or otherwise
deal for their own accounts in such Shares and other securities of Ethos Capital or related investments in
connection with the Offer or otherwise. Accordingly, references in the pre-listing statement, once
published, to the Shares being issued, offered, subscribed, acquired, placed or otherwise dealt in should
be read as including any issue or offer to, or subscription, acquisition, placing or dealing by RMB and any
of its affiliates acting as investors for their own accounts. In addition, RMB may enter into financing
arrangements and swaps in connection with which RMB or its affiliates may from time to time acquire,
hold or dispose of Shares. Neither RMB nor any of its respective affiliates intends to disclose the extent of
any such investment or transactions otherwise than in accordance with any legal or regulatory obligations
to do so.
Date: 18/07/2016 08:03:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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