A pair of Nigerian-born entrepreneurs are out to duplicate in Africa what some of the world’s most successful asset managers have done in North America, with a helping hand from Prem Watsa, chairman and chief executive officer of Fairfax Financial Holdings Ltd Fairfax Financial Holdings.
Tope Lawani and Babatunde Soyoye, co-founders of US$3.6-billion fund manager Helios Holdings Ltd., will close a merger on Wednesday with Toronto Stock Exchange-listed Fairfax Africa Holdings Corp. Fairfax Africa Holdings, which Mr. Watsa took public in 2017. The new company, called Helios Fairfax Partners Corp., ranks among the largest Africa-focused private-equity investors.
“This is a new era for Fairfax,” Mr. Watsa said in an interview. He said the partnership with Mr. Lawani and Mr. Soyoye, a year in the making, is an example of Toronto-based Fairfax joining forces with proven local investors as the company expands globally. Fairfax also has a TSX-listed subsidiary that invests in India; Prime Minister Narendra Modi recently spoke at its investor event.
For Mr. Lawani and Mr. Soyoye, marrying their 16-year-old firm with TSX-listed Fairfax Africa means gaining access to permanent capital for their investments, rather than constantly raising a fund, investing and then handing the money back to institutional investors. Trailblazing North American platforms such as Blackstone Group Inc., Brookfield Asset Management Inc. and Onex Corp. use the approach that Helios Fairfax Partners is adopting, with a public company parent overseeing a series of private funds.
While Mr. Lawani and Mr. Soyoye are proudly Nigerian, they learned the investment business at a leading U.S. private-equity firm, Texas-based TPG Capital.
Mr. Lawani, who holds an engineering degree from the Massachusetts Institute of Technology and a law degree and MBA from Harvard, worked on TPG buyouts of Burger King and brewer Scottish & Newcastle’s chain of 1,450 pubs in Britain. Mr. Soyoye, a British-educated engineer who also has an MBA, covered telecom and media companies at TPG.
The two formed London-based Helios with backing from investors such as the World Bank, and raised three funds. A new, US$1.25-billion fund is currently being marketed. In a press release, Mr. Lawani said joining forces with Fairfax “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.”
For Fairfax, merging with Helios brings new leadership to an African division that has performed poorly of late, after making its debut on the TSX three years ago at US$10 a share. Over the past year, Fairfax Africa lost money on investments in several regional banks and its stock closed Tuesday at $4.04.
Helios invests in a number of sectors, including financial services, energy services, telecom, media and technology. The fund manager owns businesses in 30 countries, including South Africa’s largest outdoor sign company, a Nigerian cellphone tower operator, insurers and pension fund managers.
The merger will see Helios’s principals own 45.9 per cent of the combined public company, while Fairfax Financial will retain voting control. Helios’s founders are sharing 25 per cent of the carried interest – the profit the manager makes on its share of investments – in their first three funds with shareholders in the new company. It is common for founders to keep all the carried interest on older funds when selling private-equity businesses. Helios will evenly split the carried interest on current and future funds.
Mr. Watsa said Fairfax and Helios reached broad agreement on the structure of a deal last December, and neither side found a reason to change the terms, even as the COVID-19 crisis played out. He said: “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.”
In June, Mr. Watsa personally invested US$148.95-million to buy additional shares in Fairfax Financial, after calling the stock “ridiculously cheap.” At the time, he said “I have never seen Fairfax shares sell at a bigger discount to their intrinsic value than they have recently.”
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Andrew Willis