In the biggest private equity deal so far this year, London-based private equity firm Actis Capital LLP is leading a consortium of investors to acquire electrical engineering business Alstom South Africa (ASA) for 5.16 billion rand ($700 million).

The other investors in the consortium include South Africa's Old Mutual Investment Group (Pty.) Ltd., the management of Alstom South Africa and existing shareholders and South African black empowerment principal investment companies Kagiso Trust Investments Ltd. and Tiso Group Ltd.

Rand Merchant Bank, a division of First Rand Bank Limited, advised on the transaction, which was funded by a combination of debt and equity funding with Nedbank underwriting the debt component of the transaction.

Alstom said in a statement that it would participate in reshaping the shareholding of its former subsidiary Alstom South Africa, which it sold in 2002 to a group of investors.

As part of this agreement, Alstom will sell the remaining 8.1-per cent stake it held in ASA to the Actis consortium  and also increase its service offering in the region by acquiring the Johannesburg-based  wholly-owned ASA subsidiary, Alstom Power Service Pty Ltd,  which undertakes servicing, maintainance and upgrade of turbines and generators in South Africa.

Alstom will said it would also provide its services to another ASA subsidiary, Alstom John Thompson (AJT), which undertakes the upgrade and retrofit of larger boilers and environmental equipment.

Alstom has had a presence in South Africa for more than a century and over 80-per cent of the country's electricity is produced from Alstom equipment. In 2007 and early in 2008, Alstom signed with Eskom the Medupi and Bravo power plant contracts. Alstom has committed major resources to the development of local skills, particularly in engineering, to support the South African government's black empowerment objectives.

Actis and Old Mutual Investment Group (SA) (Pty) Ltd ("OMIGSA") have partnered management and existing Black Economic Empowerment (BEE) partners, Kagiso, Tiso and a private black investor, in the company which is expected to benefit from increased infrastructure expenditure in the South African power distribution sector.

 The company has been operating in South Africa for more than 100 years and is seen as one of the leading suppliers in the electrical engineering sector. It is well placed to play a key role in assisting the power sector in addressing the major backlogs presently existing in the electricity transmission and distribution networks.

"Investing in South African infrastructure alongside a strong management team to create value underlines Actis's core philosophy of partnership and driving sustainable development in emerging markets," says Garth Jarvis, director at Actis.

"There is a shared vision to develop increased market share for the company and the BEE component is part of that process. The BEE participation was a crucial element of the deal which further demonstrates our ongoing commitment to building black ownership in South African business," says Jacob Hinson, director at Actis.

Commenting on the acquisition, Mark Gevers, OMIGSA's head of private equity, says, "The company has an experienced management team, good relationships with their technology partners, and a loyal customer base and this strength is reflected in the fact that it has performed strongly over the last five years."

Mark Wilson, CEO of Alstom South Africa, welcomed the acquisition and emphasised that management of the company and the operating divisions will remain unchanged. The co-operation, distribution, commercial and technology agreements with Alstom, Areva T&D and all other principals represented by the company will remain in place.

As part of the transaction, the company will sell its Power Service subsidiary, (which provides maintenance, spares and after sales services for turbines and generators), back to Alstom France and the Repair Services business will remain with existing shareholders.