ABUJA, Nov 23 (Reuters) – Flour Mills of Nigeria said on Tuesday it will acquire a majority stake in rival Honeywell Flour Mills with its own cash and some debt and aims to apply for regulatory approval in the next day or so.
The pasta maker said it was also looking at opportunities in West African countries, Chief Executive Boye Olusanya told an analyst call, adding that the deal was necessary to defend its market share.
On Monday, Flour Mills said it will acquire a total of 77% of Honeywell Flour Mills, sending its smaller rival’s shares higher. read more
“We see a clear correlation with reaching more consumers. We see the cost aspects, back office and some of manufacturing processes. Lastly … we see stronger balance sheet,” Chief Financial Officer Anders Kristiansson said.
Kristiansson said Flour Mills has a cash balance of 51 billion naira ($125 million) as of September and that the acquisition was part of plans to grow the business.
Flour Mills, which generates 80% of its sales from food and agro-business, plans to expand its reach in Nigeria and also cash in on demand of wheat-based products in the region.
In 2019, Singapore-based commodity trader Olam International agreed to buy Nigeria’s Dangote Flour Mills for an enterprise value of 130 billion naira.
The acquisition helps Flour Mills to build scale and increase it range of products and help the pasta maker defend its market share especially as Nigeria joins the continental free trade zone with anticipated increase in competition.
Both companies will operate as separate legal entities but will achieve operational synergies after the acquisition.
($1 = 409.63 naira)
Reporting by Chijioke Ohuocha Editing by Mark Potter and David Evans