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CASE STUDY
The First Tanzanian Company to Acquire a Major Kenyan Business
In a nutshell
We had owned Shelys Pharmaceuticals since 1984, and were looking to expand its reach and scope. In 2003 we partnered with Aureos Private Equity (now part of Abraaj), who took a minority stake. With their funding, we purchased Beta Healthcare in Kenya (the first ever acquisition of a large Kenyan company by a Tanzanian company), and built a new factory in Dar es Salaam, at a stroke becoming the dominant pharmaceutical manufacturer in East Africa.
In 2008, Aureos sold their shares and we also sold some of our shares to Aspen Pharmacare (a large branded and generics pharmaceutical company, listed on the Johannesburg Stock Exchange). We ran the business in partnership with Aspen for 4 years before finally selling the rest of our shares to them in 2012
Where did Sumaria add value?
We knew the sector and the business well, having grown it over a number of years, and understand how to build projects and operate manufacturing and distribution businesses and build brands in East Africa. Aureos brought capital and added strategic thinking, while Aspen helped our thinking around brands and brought several of their own into the mix
What were the challenges?
Working with partners involves a mix of styles, strategies and motivations - so always requires careful thought and consideration of each others’ views and aims. Working with Private Equity and listed companies also requires a high level of corporate governance which is sometimes a new way of thinking for a family business. We managed to successfully evolve and work with our partners for mutual benefit, and learnt from each other; one example was that generics were becoming lower and lower margin - pharmaceuticals are not tariff-protected in East Africa, with very low freight costs so subject to fierce competition from Indian manufacturers. Partnering with Aspen helped us to fully harness the power of our branded over the-counter medicines and indeed bring in new brands, helping us to differentiate our products and move away from price competition - it was a win-win for all involved
What was / is the exit strategy for us and our partners?
When partnering with private equity capital, it is always important to remember that they will need to exit at some point - and be prepared for that. By welcoming rather than fearing this aspect of our partnership with Aureos, we were able to concentrate on value creation for all concerned. When Aspen finally bought us out in 2012, it made sense for both sides - Aspen were able to bring in a portfolio of world-class generic brands they had recently acquired and manufacture them in the Shelys Africa facilities.
What was / is the exit strategy for us and our partners?
When partnering with private equity capital, it is always important to remember that they will need to exit at some point - and be prepared for that. By welcoming rather than fearing this aspect of our partnership with Aureos, we were able to concentrate on value creation for all concerned. When Aspen finally bought us out in 2012, it made sense for both sides - Aspen were able to bring in a portfolio of world-class generic brands they had recently acquired and manufacture them in the Shelys Africa facilities.
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