UK Equity Fund Eyes Billions with Sale of Java House

UK-based private equity fund Actis is looking to sell its entire investment in Java House, a restaurant chain they purchased from Abraaj Group three years ago, according to sources familiar with the matter. The sale price is expected to be in the billions of shillings, and this could indicate a change in ownership of Kenya’s largest coffee chain.

According to multiple sources, the search for a potential buyer for Java House has been taking place since last year, and this decision by Actis to sell the restaurant chain comes a few months after they agreed to acquire hotel properties in both Kenya and Tanzania.

One source cited that the purchase is about $40 million (Sh4.9 billion), and three of the prospective bidders were turned down because their asking prices were too low.

John Thompson, a communications director for Actis in London, would not provide any information about the monetary aspects of the sale, stating it as market speculation and not willing to comment on it.

The sale of Java House, which is currently facing significant competition from the rapid expansion of Artcaffe’ and other local restaurants, is predicted to solidify Kenya’s reputation as a profitable market that offers opportunities for private equity funds and development finance institutions to exit.

Numerous private equity funds and development finance organizations sell their holdings to other funds of a similar type as a way of exiting their investments, demonstrating a keen interest from institutional investors who raise money from wealthy individuals, pension funds, and governments.

Several PE funds have in the past made double- to triple-digit returns on their investments in large and medium-sized companies over the course of five to seven years.

The high returns are seen across multiple industries, including education, banking, healthcare, insurance, and manufacturing. Java House, which has been rapidly expanding since its establishment in 1999, is planning to open more locations in Kenya and expand beyond East Africa.

Java competes in Kenya against international chains like KFC and Subway as well as locally owned foreign businesses like ArtCaffe’ which has also been on an expansion push supported by PE investors. McDonald’s and Burger King are some of the additional participants in the market.

According to McKinsey research, these multinational corporations are seeking emerging markets like Africa for expansion due to the continent’s young population, rapid economic growth, and expanding disposable household incomes.

The restaurant brand’s first Kenyan chief executive, Priscilla Gathungu, took over in November of last year after Derrick Van Houten assumed leadership in March 2021. The chain was acquired by private equity firm Abraaj in 2017.