New empowerment company launches

Brainworks Capital Management aims to raise $20m for deals in key sectors
Mar 26, 2011 11:56 PM | By BUSINESS CORRESPONDENT
Former International Finance Corporation executive and banker George Manyere has launched a $20-million private equity company keen to do empowerment deals in agriculture, financial services, mining and telecoms.

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'Participation by indigenous Zimbabweans in the indigenisation of the economy'


Operating under the banner of Brainworks Capital Management, the company aims to raise the money needed by selling nearly 400 million ordinary shares of $0.0001 at $0.05 cents, mainly to pension funds, in an offer closing on April 8.

"We are still talking to a number of investors . and a deadline extension has been done for potential investors to get more comfortable with all issues relating to our investment model," Manyere said.

His company was bullish about subscription levels for the fund. Key alliances with institutional investors would fulfil the objective of being a broadly owned indigenous entity.

With Brainworks' flagship asset a 12.9% stake in Ecobank Zimbabwe - formerly Premier Finance Group, in which Manyere and partners have an offer to increase their shareholding to 30% by March 31 - the company's founding managing partner said it was targeting enterprises "with a potential internal rate of return on exit totalling 30%".

He said the company would invest in companies only if it gave them relative strategic and operational influence.

Brainworks would divest from investee companies after three to five years.

A private equity generally referred to a pool of funds used to make direct investments in private companies or buyouts of publicly traded entities, with capital obtained from retail and institutional investors.

Fresh funds were usually deployed for expanding working capital, modernisation and strengthening of the acquired entity's balance sheet.

To this end, the fund had a deal pipeline - at various stages of closure and which it would achieve in three stages - comprising gold, insurance, microfinance, platinum, poultry and telecoms assets, and where it has budgeted up to $15-million for bullion production and an equally shared $2.5-million for agriculture and banking assets.

The company said its first phase of banking asset-consolidation was completed with the Ecobank transaction.

With greater opportunities in Zimbabwe's privatisation programme - revived by the government's sale of the Zimbabwe Iron & Steel Company to Essar Africa Holdings - and the expected Net*One disposal, Brainworks had also taken to resource or extractive sectors due to their stronger performance and yield cycles.

According to its offer document, co-authored with adviser KPMG Zimbabwe, the company's net asset value was projected to grow at a compounded annual rate of 23%. Stressing that the company would target non-quoted and externally listed entities, Brainworks' cherished equity thresholds in chosen ventures were given as anything from 15% to 30%.

"Where investee businesses are struggling to achieve critical objectives, private equity firms like Brainworks Capital will assist through their specialised human capital skills and global network of business relationships," Manyere said.

Its goal of "broad participation by indigenous Zimbabweans in the indigenisation of the economy" would be achieved by diversification of the company's ownership structure to include institutional financiers and others.

While Brainworks seeks to enforce deal origination and monitoring mechanisms of commercial targets, the company counts on the diversity of its board to do deals. Board members include African Development Corporation founder Dirk Harbecke, ex-Kingdom Zephyr staffer NanaAma Dowuona, Alwyn Scholtz of SA, mine strategist Wayne Waterworth and Swiss banker Cornel Vermaak.

With the majority of private equities made up mainly of institutional and other accredited investors willing to commit large sums of money over a long period, they often demand longer holding periods to allow for distressed companies to turn around or until liquidity events such as public offerings are possible to execute their exit strategy.

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Comments by Sonny

Just another way to tap into pension funds and leave pensioners stranded!