Actis, a leading private equity investor in emerging markets, announced today that it had purchased the Fuel Logistics Group (Fuel), a South African supply chain and logistics services group, in a secondary buyout. The purchase price is undisclosed because of agreement on confidentiality between the parties.
Fuel provides customised solutions in the logistics and supply chain environments. It has industry verticals in the FMCG and pharmaceutical/healthcare sectors through its SCS and PHD divisions; and effects a broad spectrum of distribution services through its RTT, HRP and SOS units. Fuel combines the individual service offerings of the divisions into a seamless capability that positions it as a leader in many of the markets it operates.
Fungai Ruwende, investment principal at Actis, said, "Road logistics is ubiquitous in South Africa; 80% of everything that South Africans consume, wear or use is transported to them by road. As a result, road logistics businesses account for approximately 15% of South Africa's GDP. Logistics is an area in which we have a keen interest and have developed expertise, through our global network and specialised sector teams."
Fuel’s footprint extends across Africa, with its main focus being South Africa, and comprises over 180 000m2 of warehousing and cross docking facilities, a fleet of over 1,100 vehicles and employs over 6,500 people. It is responsible for the execution of about 40,000 deliveries, or 2,000 tonnes of goods, per day.
“Fuel represents an opportunity to invest in a rapidly expanding market and, with its wide range of logistics services and focus on customer service; we expect strong future business performance. Growth in the logistics industry is typically at multiples of economic growth and, with SA’s GDP growth prospects around 5% – 6% in the next few years; we are expecting double digit growth for Fuel. Only about 60% of logistics in South Africa is outsourced compared to 80% of global benchmarks and we believe this penetration of third party logistics will continue with increasing complexity of supply chains. We look forward to working with the Fuel management team to maximise all these growth opportunities,” Ruwende said. The transaction also enhances Black Economic Empowerment (BEE) ownership, with 25% of the equity of the company owned by a BEE consortium. This will satisfy the company’s empowerment goals and lead to the expansion of Fuel’s client base. Funding for the BEE element of the transaction has been facilitated through the Actis Africa Empowerment Fund and Makalani Holdings Limited, a mezzanine financing company that finances BEE transactions. Makalani also has direct equity in the company. Management will own 15% of the company.
Jason Lombard, CEO of Fuel, said, “Actis has shown an appetite for the logistics sector which is exciting. Their acquisition capability will position Fuel well for the road ahead, whilst their African presence aligns with our expansion into the continent. There is a shared vision to develop new markets and the BEE component is part of that process. With the 25% equity stake and our BEE scorecard, we will be well positioned to move into previously unavailable markets. Most importantly though, is their attitude towards the growth and development of the Fuel Group and the commitment of resource to make that happen.”
John van Wyk, partner at Actis, said, “Investing alongside strong management to create value underlines our core philosophy of partnership. We are also excited by the possibilities to develop pan-African opportunities by leveraging Actis’s extensive, on-the-ground network across the continent.”
The sellers consist of consortium of financial investors led by RMB who bought Fuel in 2003 for R676m. In addition to the Actis Africa Empowerment Fund investment, this transaction comprises Actis’s two pan-African private equity funds (Actis Africa Fund 2 and the Canada Investment Fund for Africa which is jointly managed with Cordiant).