BUSINESS MAVERICK: Inside African Phoenix’s R1.2bn private equity gamble

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BUSINESS MAVERICK: Inside African Phoenix’s R1.2bn private equity gamble By Ray Mahlaka rayMahlaka

Private equity has at times conjured up feelings of trepidation in investment circles because of its bad reputation.

After pumping debt into Edcon to mount the many failed turnaround initiatives, Bain sold the retailer in 2016, leaving it in financial distress. But Bain managed to suck out about R664-million in “consulting fees” over its eight-year Edcon investment. The private equity fund is part of API’s strategy of shifting from being a financial services firm to an investment holding company after it separated from African Bank and recently sold its long-term insurance business, Stangen, to King Price for R140-million.

To shift its strategy to an investment holding firm, API had to repurchase and cancel all the 13.5 million preference shares issued by Abil in the 10 or so years before its collapse. These shares are common in the banking environment; they get fixed dividends and usually don’t have voting rights.

 

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