In a move that has been conducted largely under wraps, the Overseas Private Investment Corp. (OPIC) has recently turned over its South America Private Equity Growth Fund LP (SAPEG) to Baring Private Equity Partners (BPEP) to manage.
Westsphere Group formerly managed the fund, which was launched in 1996 and capitalized at $180 million to provide expansion and growth capital for mid-sized Latin American companies. It is fully invested to date, primarily in Brazil and Argentina, with one investment in Colombia. It has seen one exit, in Argentine retailer Eki, sold two years ago, although no information is available concerning that transaction. The fund’s portfolio today includes 10 companies in packaging, consumer products, business services, distribution, software and retail.
“It’s an interesting portfolio and financially attractive for us to manage it,” said Varel Freeman, a senior partner with the firm. He added OPIC has assumed the role of GP of SAPEG. The reasons behind the management change remain confidential. Officials at OPIC and Westsphere could not be reached for comment.
“One of the companies [in SAPEG’s portfolio] is Brazilian enterprise resource software company Data Sul. Our team has a lot of experience in software, in business services, and in particular, in areas such as collaborative commerce, the direction in which enterprise resource software companies need to be moving in order to remain competitive. So here is an opportunity to take one of our team’s strengths and help out the portfolio company.”
Moreover, on the financial side, Baring receives a management fee as well as an incentive based on the value it creates within the portfolio, like all fund managers do.
In deciding upon a new fund manager, OPIC considered factors such as successful experience in the region, on-the-ground regional presence, Baring has offices in Mexico City, So Paulo and New York, strong managerial ability and value recovery expertise, according to Baring.
In addition to SAPEG, Baring manages the Baring Mexico Private Equity Fund LP, with $67 million, and the Baring Latin America Private Equity Fund LP, a $40 million fund for which BPEP plans to raise $250 million to $300 million. Jointly they hold investments in Mexico, Brazil and the U.S. Among these are: Consorcio Hogar, S.A. de C.V., a developer of low-income, popularly priced housing, and in Analytica, a Bloomberg-like financial services provider, both in Mexico.
In terms of Baring’s new portfolio, Freeman said he feels “a couple of these companies are well positioned and could face opportunities for liquidity relatively soon. You never want to predict that you’ll be able to sell a company until the check is in the bank, but we see some things that can be done to help a couple of these companies reach liquidity a little bit faster than might otherwise be the case.”
He added that the Argentine portfolio is facing very tough times, obviously as a result of the economic environment, not necessarily as a result of poor management.
But, he said, “we have a team that has encountered devaluations and hyperinflation and ill liquidity in the banking system [throughout Latin America], so we have a lot of the skills that are necessary to serve as strategy guidance in countries like Argentina.”
For the 10 additional companies Baring has taken on, it will hire more people, but has yet to announce specifics.
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