The expected sale of east Africa’s largest chain ofcoffee shops is being regarded as a bellwether deal to measure internationalprivate equity groups’ interest in the region, according to an article in today's Financial Times.

TPG and Carlyle, two of the world’s largest buy outgroups, have expressed interest in purchasing Nairobi-based JavaHouse, with an estimated value of up to $100 million, according to the newspaper's sources.

But the sale will mean more than just a big pay day for the owner and has far wider implications for Kenya and the whole of developing east Africa.

“If you’d told me a couple of years ago a $100mrestaurant deal was possible, I’d have said it was a pipe dream,” said FelixOlale, a partner at LeapFrog Investments, told the Financial Times. Last November LeapFrog bought a majoritystake in Kenya’s GoodLife Pharmacy for $22m, a record for that sector in theregion.

“For private equity, South Africa is always number one[on the continent], but east Africa has been growing faster than west Africaover the last couple of years.”

Java has more than 50 outlets in Kenya, Uganda andRwanda, as well as pizza restaurants and frozen yoghurt shops.

It is currently controlled by Emerging Capital Partners, aprivate equity group that has a 90 per cent stake.

People briefed on the situation said ECP, which boughtthe Java in 2012, is looking to sell the business. ECP, TPG and Carlyle alldeclined to comment.

Mergers and acquisitions in Africa fell by nearly one-third in 2016, which was a reflection of the commodities slump during the year, according to Clifford Chance, the law firm.

But the drop in M&A activity in east Africa, where economies are seen by analysts to be more diversified and forecast to grow at between 5 per cent and 8 per cent in 2017, was only 10 per cent last year, data gathered by the Nairobi-based financial advisory firm I&M Burbidge Capital show.

READ FULL FINANCIAL TIMES STORY HERE

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