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Private equity: Bain and Actis hunt big game in Africa

South Africa is beginning to hit the radar screens of global private equity funds, with two big transactions, one completed the other still being negotiated, grabbing the headlines. Bain Capital bought Edgars Consolidated Stores (Edcon), while an Actis-led consortium raised its bid for Alexander Forbes, Africa’s biggest independent retirement fund administrator. The deals signal a shift towards buyouts in South African M&A, which has tended to be dominated by black economic empowerment transactions.

On February 8 Edcon, South Africa’s largest retailer, accepted a R25 billion ($3.5 billion) takeover bid from US buyout firm Bain Capital. This is South Africa’s largest deal and firmly places the country in the private equity arena.

The Bain Capital bid came in at 51% above Edcon’s share price, an offer that some market participants say illustrates the premium levels firms are willing to pay to enter this growing market. Bain adopted an interesting strategy for its bid. Instead of putting in an opening offer, which could be increased, the company’s first bid was legally bound as its only bid – a method that made price negotiations impossible but sped up the deal-making process.

Dwight Poler, managing director at Bain Capital, says: "We think South Africa is a market with tremendous growth dynamics.

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