Mauritius Private Equity Firm in Talks to Fully Acquire Java

Adenia Partners, a Mauritius-based private equity firm, is in talks to fully acquire restaurant chain Java House in a transaction worth up to Sh3 billion, amid increased deal-making in Kenya’s hospitality sector.

According to a person familiar with the negotiations, Adenia’s offer to acquire the stake owned by UK-based fund Actis is still in the early stages.

Actis is looking to cash in on the stake it acquired from Dubai-based Abraaj Group in a potential deal worth between Sh2.5 billion and Sh3 billion.

The Mauritius-based private equity firm’s interest in Java comes at a time when top hotels are either closing or changing hands as the industry recovers from Covid-19 travel restrictions.

“Adenia is offering to buy Java. The deal is estimated to be around Sh2.5 billion to Sh3 billion and talks are looking good,” said the source, who sought anonymity.

Actis put Java up for sale and sources say it valued the casual dining and coffee chain at $40 million (Sh4.9 billion).

The Fairview Hotel, Town Lodge, and City Lodge in Two Rivers in Nairobi were purchased by the UK fund for an estimated Sh1 billion earlier this year.

After purchasing shares in the fresh cut rose retailer Reds Land Roses, the heavy construction equipment dealer Kanu Equipment, and the health kit retailer Africa Bio system limited in 2019, Adenia will expand its foothold in Kenya with the Java deal.

The PE fund favors acquisitions in the agribusiness, hotel, and health sectors on the continent and has operations in seven African nations, including South Africa, Kenya, and Ghana.

Actis chose not to comment on the potential acquisition, while Adenia and Java chose not to.

In response to queries from Business Daily, Actis stated, “We decline to comment on this matter publicly.

In the wake of the Covid-19 economic repercussions, a number of prestigious hotels, including the Hilton, InterContinental, and Laico Regency in Nairobi’s city center, ceased operations. A few hotels were sold.

Last year, the Crowne Plaza Hotel was fully acquired by Kasada Hospitality Fund, which is supported by the Qatar Investment Authority (QIA), the nation’s sovereign wealth fund, for an estimated Sh4.6 billion.

A Nepalese businessman paid Sh2.8 billion for the shares of The Norfolk and Fairmont Mara Safari Club owned by Saudi billionaire Prince Al-Waleed bin Talal, while Actis purchased Nairobi’s Fairview Hotel, Town Lodge, and City Lodge Two Rivers from City Lodge.

An American created Java in 1999, and that same year it debuted its first coffee shop in Nairobi’s Adam’s Arcade.

Since then, the business has expanded to 75 locations across Kenya, four in Uganda, and three in Rwanda. Earlier, it attempted to open branches in Dar es Salaam, Lagos, Accra, and Lusaka.

Due to a young population, rapid economic expansion, and rising disposable household incomes, Kenya’s restaurant business has experienced tremendous growth in recent years.

Due to this, international chains like Domino’s Pizza, KFC, Subway, Burger King, Cold Stone Creamery, and Tori doll have decided to expand their presence in Kenya.

Additionally, regional chains like Artcaffe are rapidly growing and stealing some of Java House’s market share.

According to a McKinsey research, these multinational corporations are looking to emerging countries like Africa for expansion due to the continent’s growing middle class.

With 82 locations, Java is the largest restaurant brand in the area, followed by Burger King (33), KFC (33), Chicken Inn (72), Artcaffe (35), and KFC (5). Subway and Big Square are among the competitors who are vying for the same clientele.

In addition to Kukito, the Java House Group also owns Planet Yogurt (PY) and 360 Degrees Pizza.

As part of a takeover scheme that also required the chain’s founder and chairman Kevin Ashley to sell his 10% investment, Washington-based Emerging Capital Partners (ECP), who held 90% of Java in 2017, surrendered the entire holding to Abraaj.

Actis purchased a 10% investment in Brookside Dairy three years ago as part of a global transaction that gave it indirect influence over Java’s owner, Abraaj Holdings.

Priscilla Gathungu, the first Kenyan chief executive of Java, took over for Derrick Van Houten in November of last year.

The reasons behind Mr. Van Houten’s departure just two years after joining the company from KFC in March 2021 are still unclear, but the most recent moves indicate that Java’s C-suite is in constant flux.

In less than four years, Ms. Gathungu has served as Java House’s third CEO.