Ascent Rift Valley Fund (ARVF) has signed an investment deal that will see it acquire a majority stake in Auto Springs East Africa.
The deal is their first investment in the automobile industry in the region and their second investment in Kenya. The fund invests in Kenya, Uganda, and Ethiopia.
The Limuru-based factory produces a wide range of products for the motor assembly and vehicle spare parts industry including a variety of wiring harness, leaf springs, nuts, bolts, and washers to fit cars, trucks, and SUVs.
ARVF will acquire a majority stake in Auto Springs East Africa in a partnership deal with SFC Finance Limited (SFC), a non-bank financial institution which provides secured medium and long-term debt financing to SMEs in Africa.
David Owino, Partner at Ascent Capital Advisory Services LLP disclosed that the investment had been done in partnership with SFC because they had shown increased interest in investing in East Africa and especially Kenya which has over the years embraced private equity funding.
“SFC has come in as a debt partner and the Ascent Rift Valley Fund will provide equity in this transaction,” said during the signing of the deal,” said David Owino.
Owino further stated that with the investment, ARVF expects to gain a significant share in the growing automobile industry. Besides the capital going to acquiring the majority stake in the company, Ascent announced the financing will be used for product expansion and factory improvements.
With favorable economic policies, Kenya has become the ideal hub for automotive manufacturers to gain entry into East and Central African region and grow their business. Auto Springs is positioning itself to serve this growing sector.
The assembly industry in Kenya is growing with the entry of major international players looking to turn around the local car assembly industry.
Last year, Peugeot announced the re-opening of its car assembly facility targeting production over 1,000 units annually. Volkswagen has also begun production at Kenya Vehicle Manufacturers plant in Thika. Last September, Simba Corporation took full control of Mombasa-based, Associated Vehicle Assemblers (AVA), with plans to expand production with clients such as Toyota Kenya, Scania, Tata and Volvo on board.
This year Foton Motors re-entered the market and has joined the assembly line at AVA.