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Sunday, 6 December 2020

Lorax Capital acquires “significant” minority stake in Dsquares in first investment by its new fund

Lorax Capital Partners has acquired a “significant” minority stake in loyalty services provider Dsquares through its LCP Fund II, the private equity outfit said in a statement (pdf), without specifying the size of the stake or the value of the investment. The acquisition includes Ezdehar Egypt Mid-Cap Fund’s 22.5% stake, which Lorax Capital was reported to be in talks for back in October. The bulk of the investment came through a capital increase which the fund says will be used to up-scale Dsquares’ new business lines and expand the company’s footprint in Egypt and abroad.

The investment is the first Lorax has made since closing its LCP Fund II. Lorax said in October it had raised USD 142 mn from international limited partners including EAEF, EBRD and the French Development Agency’s Proparco for its new USD 250 mn SME-focused fund.

Who are the players? Lorax is an Egypt-focused private equity firm with LPs that include a who’s who of development finance agencies and other international players. Lorax’s portfolio also includes stakes in Sarwa Capital and Fawry as well as NIS Schools, among others. Dsquares is a Cairo-based startup that provides end-to-end loyalty, rewards and concierge services. Other Dsquares include our friends at Algebra Ventures, the EBRD and the IFC as well as Cisco.

But Enterprise, why do PE people talk funny? Like how does a “closed” fund still make an investment? Welcome to the weird (and frankly wonderful) language of private equity investors. Private equity general partners (Lorax in this case) will typically raise a fund (LCP II) from limited partners (EBRD, EAEF — normals would just call them “investors”). Those LPs make commitments to the fund, which hopes to reach a first close (to gin up some excitement) and then a final close (which just means “I raised all the funding I want”). The GP then calls the capital or draws down the commitments made by the LPs (“Gimme my funds, please”) so that it can make investments in portfolio companies (Dsquares). We can talk some other morning about how the PE firms make returns.

Advisors: Al Tamimi Law Firm acted as the legal advisor to Lorax while Youssef & Partners provided legal advice to Dsquares.

OTHER M&A NEWS-

Raya Holding is planning to acquire 100% of two subsidiaries of Saudi conglomerate Alturki Holding, the company said in a regulatory filing (pdf). The company might bring the targets, United Retail Company (URC) and Itsalat International Egypt (i2 Stores), under the umbrella of its retail electronics arm, Raya Shop. EGX-listed consumer stalwart MM Group tried to buy URC and i2 Stores back in 2018.

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