Mauritius private equity firm in talks to fully acquire Java

An empty terrace at Java Kimathi Street. FILE PHOTO | DIANA NGILA | NAIROBI

Mauritius-based private equity firm Adenia Partners is in discussions to fully acquire restaurant chain Java House in a transaction that could hit Sh3 billion amid heightened deal-making in Kenya’s hospitality sector.

The talks over Adenia’s offer to acquire the stake owned by UK-based fund Actis remain at an advanced stage, according to a person familiar with the negotiations.

The potential deal could be valued at between Sh2.5 billion and Sh3 billion as Actis seeks to cash in on the stake it acquired from Dubai-based Abraaj Group.

The Mauritius-based PE’s interest in Java comes in a period when top hotels have either closed or witnessed ownership changes as the sector recovers from Covid-19 travel curbs.

“Adenia is offering to buy Java. The deal is estimated to be around Sh2.5 billion to Sh3 billion and talks are looking good,” said the source, who sought anonymity.

Actis put Java up for sale and sources say it valued the casual dining and coffee chain at $40 million (Sh4.9 billion).

This marks the UK fund’s latest deal in Kenya’s hospitality sector after agreeing to buy Nairobi’s Fairview Hotel, Town Lodge and City Lodge in Two Rivers for an estimated Sh1 billion.

For Adenia, the Java deal will deepen its presence in Kenya after acquiring stakes in retail chain Quickmart in 2019, Reds Land Roses which deals in fresh cut roses, heavy construction equipment dealer Kanu Equipment and Africa Biosystem Limited—which deals in health kits.

The PE fund, which has a presence in seven African countries including South Africa, Kenya and Ghana, has a bias for agribusiness, hospitality and health sector deals on the continent.

Adenia and Java did not comment on the proposed deal while Actis declined to comment on the potential transaction.

“We decline to comment on this issue publicly,” Actis said in response to Business Daily questions.

A number of top hotels, including Hilton, InterContinental, and Laico Regency in Nairobi’s city centre, stopped operations amid the Covid-19 economic fallout. Some hotels changed hands.

Read: Java back on sale as UK equity fund eyes billions

Kasada Hospitality Fund, which is backed by the Qatar Investment Authority (QIA) — the country’s sovereign wealth fund—last year fully acquired Crowne Plaza Hotel for an estimated Sh4.6 billion.

Saudi billionaire Prince Al-Waleed bin Talal sold his stake in The Norfolk and Fairmont Mara Safari Club to a Nepalese tycoon for Sh2.8 billion while City Lodge offloaded Nairobi’s Fairview Hotel, Town Lodge and City Lodge Two Rivers to Actis.

Java, founded in 1999 by an American, opened its first coffee shop in the same year at Adam’s Arcade in Nairobi.

The chain has since grown to 75 branches in Kenya, four in Uganda, and three in Rwanda, and has previously sought to expand to Dar es Salaam, Lagos, Accra, and Lusaka.

The restaurant industry in Kenya has seen significant growth in recent years, driven by rising disposable household incomes, fast economic growth, and a young population.

This has attracted global players such as KFC, Subway, Burger King, Cold Stone Creamery, Toridoll, and Domino’s Pizza to open more stores in Kenya.

In addition, local chains, such as ArtCaffe, are expanding rapidly and taking a portion of Java House’s market share.

These global players are turning to emerging markets such as Africa for growth, attracted by a rising middle class, according to a study by McKinsey.

Java is the biggest restaurant chain in the region with 82 outlets, followed by Chicken Inn (72), Artcaffe (35), KFC (33), and Burger King (5). Among other players targeting the same clientele are Subway and Big Square.

Besides Kukito, Java House Group runs Java restaurants, Planet Yogurt (PY), and 360 Degrees Pizza.

Washington-based Emerging Capital Partners (ECP), which owned 90 percent of Java in 2017, sold the entire stake to Abraaj as part of a takeover plan that has also forced the chain’s founder and chairman Kevin Ashley to part with his 10 percent stake.

Three years ago, Actis acquired indirect control of Java’s owner — Abraaj Holdings — through a global transaction that saw it acquire a 10 percent stake in Brookside Dairy.

Read: Java House appoints first Kenyan CEO 

Java is headed by Priscilla Gathungu, who became its first Kenyan chief executive when she replaced Derrick Van Houten last November.

The reasons for Mr Van Houten’s departure barely two years after joining the chain in March 2021 from KFC are still not clear, but the latest changes signal a revolving door at Java’s C-suite.

Ms Gathungu is the third chief executive of Java House in under four years.

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