Helios and Fairfax Africa intend to combine businesses

Posted on: 12 July, 2020 at 6:07 PM

Fairfax Africa, an investment holding company traded on the Toronto Stock Exchange whose objective is to make investments in African businesses, announced on Friday that it has entered into a definitive agreement with Helios Holdings Limited, the leading Africa-focused private investment firm, for the combination of their complementary businesses on one unified platform.

The Helios Holdings Group will contribute certain economic streams (from the management and performance fees arising from current and future Helios funds) to Fairfax Africa in exchange for a 45.9% equity and voting interest in the pro forma share capital of Fairfax Africa. Fairfax Financial Holdings Limited will retain voting control of the combined entity.

On closing of the transaction, Fairfax Africa will be renamed Helios Fairfax Partners Corporation (HFP) and continue to be listed on the Toronto Stock Exchange.

Tope Lawani and Babatunde Soyoye, the co-founders and managing partners of Helios Investment Partners LLP, the investment advisor to the Helios funds, will be appointed as co-chief executive officers of HFP. Since 2004 they have jointly built the leading pan-Africa focused private equity business with four successful funds. The current CEO of Fairfax Africa, Michael Wilkerson, will become the executive vice chairman of HFP.

Upon closing, Helios will be appointed sole investment adviser to HFP. As a result of the transaction, HFP shareholders will benefit from a broader team of experienced investment professionals fully focused on Africa, with deep local knowledge, differentiated capabilities and a successful track record across the continent in identifying and securing high-quality, largely proprietary, investment opportunities.

In addition to being appointed as investment advisor to HFP, Helios will pursue the growth of its third-party investment advisory business in Africa-focused alternative assets, continuing to advise on its existing private equity and credit funds, with combined assets under management of over US$3.6 billion, and raising and deploying future funds in similar strategies and new initiatives. Current investors in Helios’ latest fund, Helios IV, include CDC Group (the UK’s development finance institution) and the International Finance Corporation (a member of the World Bank Group). The transaction will strengthen Helios’ third-party fund advisory capabilities by enabling greater investment flexibility and capacity, enhancing Helios’ position as a constructive and creative partner of choice for Africa.

The transaction creates a leading Africa-focused alternative investment manager with the strength and stability of an investment holding company and the enhanced cash flow and liquidity profiles of an alternative asset manager. HFP will continue to be publicly-listed and will represent an attractive investment vehicle offering exposure to high-quality investments in African markets. HFP’s business will benefit from diversified revenue streams from both recurring and predictable asset management fees and carried interest income from long-dated third-party funds under management as well as capital gains from the appreciation of its proprietary capital. HFP’s permanent capital base will support the launch of new third-party fund strategies and initiatives, leveraging Helios’ track record and expertise.

Additional transaction details

Fee streams contributed by Helios Holdings Group consist of:

– 100% of excess fees, defined as all management and other fees paid to Helios or any of its affiliates in connection with the management of any existing or future fund (including the management of HFP and its subsidiaries) less expenses, administrative fees or other fees necessary for the operation of managing those funds,

– 25% of all carried interest amounts generated by any existing private equity fund managed by Helios or any of its affiliates, excluding Helios IV, and

– 50% of all carried interest amounts generated by any future fund managed by Helios or any of its affiliates, including Helios IV.

The current carried interest incentives for Helios’ investment professionals remain in place and the all-share transaction ensures strong alignment between the investment team, limited partners of Helios’ funds and the shareholders of HFP in delivering strong and sustainable performance across all parts of the combined business.

Tope Lawani, co-founder and managing partner of Helios Investment Partners LLP said: “We are proud to be partnering with Fairfax Financial and Prem Watsa on this next step of Helios’ development. The combination leverages our mutual strengths and enables us to provide public market investors with unique access to a differentiated set of investment opportunities on the African continent, as we have been doing for our partners in our private funds. This will strengthen our ability to deliver on our mission to generate globally competitive investment returns and create positive socioeconomic development outcomes for Africa by building profitable, value-creating and socially responsible businesses.”

Prem Watsa, chairman and CEO of Fairfax Financial Holdings Limited added: “We are excited to partner with Tope and Babatunde in establishing Helios Fairfax Partners. They have an outstanding track record in investing in Africa over the past 15 years. Our cultures are very similar and Tope and Babatunde, with our support, aim to establish the pre-eminent investment vehicle for Africa in the years to come. We believe this partnership will be good for Africa, the shareholders of Fairfax Africa and Helios and the employees of both organisations.”

Michael Wilkerson, chief executive officer of Fairfax Africa, said: “This combination creates the pre-eminent pan-African investment platform, bringing together the complementary strengths of our respective expertise, cultures and people, in an attractive permanent capital vehicle. We are very pleased to partner with Tope, Babatunde and the entire Helios team, and look forward to working together to build sustainable value for our shareholders over time.”