NIGERIA – Global food and agribusiness giant, Olam International has announced that it has submitted a binding offer to acquire Dangote Flour Mills (DFM), Nigeria’s leading wheat milling company for US$361 million (NGN 130 billion).
The transaction includes five flour and pasta production facilities operated by DFM as well as its logistics capabilities including access to two ports (Apapa and Calabar).
The Singapore-based agribusiness company said addition of DFM further strengthens its portfolio ‘by investing in proven businesses where it has consistently performed and gained market leading positions’.
Olam which currently operates wheat milling and flour and pasta manufacturing in Nigeria and Sub-Saharan Africa is looking to increase its footprint in Africa, where demand for high-quality flour is quickly rising.
With the acquisition of DFM, Olam says it has an increased manufacturing footprint to reach a broader population across Nigeria, where demand is driven by increased consumption of convenient and affordable wheat-based products, such as bakery, snacks and pasta.
DFM, the flour division of industrial conglomerate Dangote Group, owned by one of the richest men in Africa, Aliko Dangote complements Olam’s strategy to grow its milling and feed business.
Olam has identified Grain and Animal Feed business as one of its prioritised platforms for growth, with a goal to expand its 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,” said K.C. Suresh, Managing Director and CEO of Olam Grains and Animal Feed.
“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.”
The company said it will further leverage its strengths and scale in global sourcing, freight, risk management and operational excellence to deliver operational and cost efficiencies which in turn would deliver higher value to the Nigerian consumers.
Less than four years after Dangote Flour Mills was acquired by South Africa’s Tiger Brands, it was acquired back by Dangote in 2016.
Tiger Brands sold 65.7% stake in Dangote Flour Mills, which was making losses at the moment to Dangote Industries for US$1 billion, something that saw rebranding of the business to its original name.
Since the acquisition by Tiger Brands, the company is said to have experienced massive losses in the first years but has since rebounded.
The Olam strategy
Olam’s strategic outlay on the continent dates back to 2010, when it acquired Crown Flour Mills (CFM) for US$107.6 million.
In 2016, Olam added another key wheat milling and pasta manufacturer, Amber Foods Ltd. from the BUA Group.
Olam said the acquisition strengthened its position to become number two wheat miller by sales volume, increasing its wheat milling capacity to 6,140 tonnes a day from just 2,380 tonnes.
CFM which supplies bread flour, noodle flour and semolina was among the top three largest wheat millers in Nigeria and with the addition of Dangote Flour Mills, Olam undoubtedly becomes the largest flour miller in the country.
The acquisition comes after the recently unveiled six-year strategic plan to invest US$3.5 billion in high potential growth businesses including grains and animal feed, while divesting four other businesses.
Nigeria which is the most populous country in Africa is a massive market for wheat flour, and this has seen the rise of some of the biggest flour millers such as Flour Mills of Nigeria and Honeywell Flour Mills.