CDC Capital Partners, the government-backed private equity group that invests in developing countries, has been split into two separate entities responsible for the investment management and asset holding functions. The new independent management company will be called Actis, a limited liability partnership, majority controlled by its management and staff. The UK government will continue to hold an interest. The investment company will retain the CDC name and ownership of the investment portfolio, and will be wholly owned by the government.
Malcolm Williamson has been appointed as chairman of the new CDC, the current chairman, Lord Cairns, will become chairman of Actis.
Formerly known as the Commonwealth Development Corporation, CDC was established 50 years ago to provide equity capital for commercially sustainable business ventures in developing countries. Owned by the government’s Department for International Development, the group also aims to encourage private sector investment in these markets.
The reorganisation, which has been expected for some time, is designed to expand investment in the world’s poorest countries and improve CDC’s investment performance. The focus will principally be on geographical areas where more investment is needed, such as sub-Saharan Africa and South Asia. After an initial 5-year contract with Actis, CDC will be able to choose its investment manager.
Actis will raise capital from CDC, as well as from other development finance institutions and private investors, as it has done since the mid-1990s. In addition to the capital that it manages on behalf of CDC, Actis will be looking to raise over $500m from third party investors over the next few years. Initially the investment focus will be on Africa, South Asia, power, and SMEs, with smaller funds for China and Malaysia. In the longer term, the commercially run funds will invest in a broad range of sectors including agribusiness, financial services, minerals, oil & gas, healthcare, IT, telecoms and consumer goods.
Paul Fletcher, who replaced Alan Gillespie as chief executive of CDC Group in 2002 and is chief executive-designate of Actis, said: “Actis begins life with a highly motivated and experienced team of investment professionals. We are committed to creating successful, sustainable businesses in poor countries, at the same time achieving commercial returns for private investors. Our ambition is to become firmly established as the premier independent investment manager for the developing world.”
Last year CDC invested $488m and realised $390m from sales of existing portfolio companies. Its first investment of 2004 has been a $26m commitment to a €545m deal to complete the permanent capital structure of Orascom Telecom Algeria. This is CDC’s first investment in Algeria and the largest single private sector investment in the country outside of the oil & gas sectors.