Aliko Dangote, Africa’s richest man, is selling a business unit of his conglomerates, Dangote Flour Mills Plc, to Olam International at a value worth N130 billion, an equivalent of $361.11 million.
The company – Dangote Flour Mills Plc – made this known in a corporate disclosure posted on the Nigerian Stock Exchange (NSE) on Tuesday.
Thabo Mabe, director at Dangote Flours, in the statement, said Olam International has indicated interest to acquire all the outstanding and issued shares of the flour mills company that are not currently owned by Ola through its subsidiary, Crown Flour Mills Limited.
According to the statement, as at the date, Olam International through its subsidiary, holds 5,113, 229 shares in the issued share capital of Dangote Flour Mills.
This is coming two years ago after the Group also sold a unit of the business, Dangote Noodle plant, to rival pasta maker De-United Foods Industries for N3.75 billion ($12.26 million).
“The total consideration offered by Olam and being considered by the Board of Dangote Flour Mills for the entire 5 billion issued shares of the company is N130 billion.
“The consideration represents the enterprise value on a debt-free, cash-free basis, payable in cash at the closing of the proposed transaction. This consideration will be adjusted for net working capital and net debt as of 31 March 2019 or any other later date that may be agreed by Olam and the Board of Dangote Flour Mills to arrive at the final price payable to equity shareholders.
“The final price to be paid to the shareholders of the company would be adjusted downwards to exclude shares held by Olam through its subsidiary,” the statement reads in part.
Dangote Flour Mills Plc said the offer is subject to shareholders’ approval, regulatory approval, a sanction of the Federal High Court.
Olams International says the acquisition will form part of the company’s strategy and commitment to the Nigerian market
K.C. Suresh, Managing Director and CEO of Olam Grains and Animal Feed, said, “the acquisition of DFM supports the strategy of the Grain and Animal Feed business, one of Olam’s prioritised platforms for growth, to expand our wheat milling capacity in high-growth markets, such as Nigeria.”
“We are confident about the growth prospects in this country and this acquisition, doubling our installed capacity here, is evidence of our long-term commitment to the Nigerian economy.
“Since 2010, when we first acquired Crown Flour Mills in Nigeria, Olam has invested in and grown a world class wheat milling franchise with a strong regional footprint across four countries in Sub-Saharan Africa. Bringing together Olam and DFM would provide enhanced manufacturing capacity and create synergies with our existing business to deliver improved products to meet customers’ needs in the market,” he added.
The loss-making Flour milling business of Africa’s richest man
Over the years, Dangote Flour Mills has faced a tough business environment in Nigeria. The Flour company sold to Dangote Group in 2013 by South Africa’s Tiger brands as a result of operating losses.
Despite that, the company continued to post yearly losses until 2017 when it returned to profit but fell back in 2018.
In its 2018 financial result released last month, Dangote Flour Mills Plc posted N1.2 billion lost for the year with factors such as the daunting Apapa gridlockand smuggling hampering its growth.
Dangote Flour Mills has location across Nigeria – Apapa, Ikorodu, Ilorin, Kano and Calabar and offers downstream value-added products through subsidiary companies. The business unit currently has one wholly owned subsidiary – Dangote Pasta Limited – with products such as Dangote Sugar, Dangote Pasta and Flours.