Nigeria, Kenya, Ghana potential targets as LeapFrog raises $800mn for Africa deals

LeapFrog Investments Limited plans to raise $800 million for its latest fund as the private-equity (PE) firm seeks stakes in African banks, insurance brokers and payment companies to tap into rising demand among low-income consumers.

LeapFrog is betting there is greater scope for investments among companies that target Africa’s emerging consumers because they are more than four times the size of the continent’s middle class. New regulations requiring insurance companies in Kenya to hold more cash will create buyout opportunities, while the continent’s largest population in Nigeria and more sophisticated consumers in Ghana make those markets attractive.

Overseas Private Investment Corporation, the Washington-based development financing unit of the U.S. government, has approved an investment of as much as $200 million in the fund, the buyout company’s third, Karima Olokun-Ola, a partner at LeapFrog in London told Bloomberg.

“We are speaking to insurance companies, ones that are looking for capital and those ones with sufficient capital but are looking to take advantage of consolidation and grow market share” in Kenya, she said last week. “We are looking at payment companies because it is becoming a popular tool that just offers much cheaper ways of doing business” across the continent.

Billionaire George Soros invested in LeapFrog’s first fund through his Soros Economic Development Fund because the financial-services market is under-served, she said.

The company’s previous fund, the $400 million LeapFrog Financial Inclusion Fund II, still has some money to spend, Olokun-Ola said. It also has a $350 million joint venture with Newark-based Prudential Financial Inc., which is focused on similar assets, she said. The company’s first fund raised $135 million.

LeapFrog’s investments average $30 million and generate internal rates of return of 25 percent, or three times the money invested, Olokun-Ola said. The company has made two sales so far out of eight investments in its first fund, and both have met targets, she said.

The Prudential vehicle has a larger mandate and may invest as much as $200 million in one company, she said.