SINGAPORE — Olam International Ltd. has agreed to acquire Amber Foods Ltd., which through its 100% owned subsidiary, Quintessential Foods Nigeria Ltd., owns the wheat milling and pasta manufacturing assets of the BUA Group in Nigeria, for a total enterprise value of $275 million.
The BUA Group, a diversified foods and infrastructure business group in Nigeria, is among the top five wheat millers in the country with wheat milling and pasta manufacturing capacities of 3,760 and 700 tonnes per day, respectively, Olam said.
The assets to be acquired include two wheat mills and a pasta manufacturing facility in Lagos, a non-operating mill in Kano in northern Nigeria, and a wheat mill and a pasta manufacturing plant under construction in Port Harcourt in the southeastern Nigeria.
The acquisition will strengthen Olam’s position as the No. 2 wheat miller by sales volume and make it a leading pasta player in Nigeria. Olam’s total wheat milling capacity in the country will increase from its current 2,380 tonnes per day to 6,140 tonnes per day once the facilities in Port Harcourt are completed in June. Olam’s total wheat milling capacity in Sub-Saharan Africa will double to reach approximately 7,640 tonnes per day.
“Nigeria is a high growth milling market with volumes expected to reach five million tonnes in 2020 as population growth and urbanization increase the demand for wheat-based products,” said K.C. Suresh, managing director and chief executive officer of Olam Grains. “The size of the Nigerian flour market is in excess of $2 billion, growing at 3.5% per year while the pasta market is growing at the rate of 8% per year. We are very pleased to acquire these strategically located, port-based assets as undeveloped land at Nigerian ports is increasingly difficult to access. They are highly complementary to our existing asset base in Lagos and Warri, and will not only strengthen our current market position and deliver multiple synergies but also enable us to access the high growth areas in the north and southeast of Nigeria.”
Olam has identified grains as one of the six prioritized platforms for investment and accelerated growth. The wheat milling operations in Sub-Saharan Africa has been a growth engine for the platform since 2010 when it acquired Crown Flour Mills (CFM) in Nigeria. Since then, Olam has expanded its capacity at CFM in 2013 and set up milling operations in Ghana, Senegal and Cameroon.
“We are confident about the growth prospects in Nigeria, so expanding our participation here is a logical step to capitalize on the opportunity,” said Mukul Mathur, country head of Olam Nigeria. “Our value-added export business in the country puts us in a strong position to manage the forex availability.”
Anurag Shukla, managing director of CFM, added, “This acquisition further increases Olam’s ability to provide low-cost food staples to the Nigerian population that have been manufactured in-country. Wheat-based products, such as pasta, have grown in popularity among Nigerians due to changing tastes, the gradual rise of convenience and, for many, as an affordable option to meet carbohydrate requirements.”
The acquisition is to be funded through a combination of debt and internal accruals and it is expected to be earnings accretive from the first year after consolidation. Olam expects the acquired business to generate an EBITDA to invested capital return of 13% to 16% when it reaches steady-state in 2018. A part of the purchase consideration will be paid upon commissioning of the facilities in Port Harcourt.
