Medu Capital, a private equity company focused on established medium sized owner-managed businesses, has acquired a 15% stake in Hero Telecoms (HeroTel) at an enterprise value of R495m. 

Siya Nhlumayo, Partner at Medu Capital, told Africa Global Funds, that the firm identified the telecommunication sector as an attractive sector to investment its private equity capital largely due to the fundamentals, in particular for wireless internet service providers (WISPS), over the medium to long term. 

“HeroTel is an ideal entry into telecoms for Medu due to HeroTel’s track record in successfully executing its acquisitive growth and organic growth strategy. Further, there was great alignment with the management team of HeroTel,” he said. 

“They control the business and the subscription proceeds from the Medu investment is going into the business to fund further growth. HeroTel was looking for a partner with capital, track record for institutionalising owner managed businesses and has the empowerment credentials,” he added.

HeroTel was established in 2014 with a mission to consolidate the wireless internet service provider (WISP) market and connect South Africa to high-speed wireless internet. 

At the time of Medu Capital’s acquisition, HeroTel has successfully concluded acquisitions of nine WISPs, thus establishing a footprint in KwaZulu Natal, Western Cape, Mpumalanga, North-West Province, Limpopo and Gauteng. 

The capital raised from the Medu Capital investment will be utilised to further HeroTel’s investment and acquisitive growth strategy. 

Nhlumayo said that HeroTel is looking to grow organically: “It has acquired nine wireless internet service providers over the last three years and they are all experiencing sustainable growth.” 

“There is an opportunity to make further acquisitions as part of the regional expansion and customer acquisition. Medu will support HeroTel should further capital be required to fund new acquisitions,” he said.

When asked about investment plans for 2017, Nhlumayo said that Medu is still investing in third fund and has a few deals in various sectors on its pipeline. 

“We continue to pursue investment opportunities that meet our investment criteria,” he said.

Medu Capital invests at least R50m in established businesses that require equity risk capital and/or BEE partners. 

The company has a record of investing in 25 businesses in diverse sectors including retail, manufacturing, industrial services, chemicals, plastics, transport, construction, mining, healthcare, technology, telecommunications and education.