Dangote Flour Mills’ enterprise value, which is seen by investors as better measure of the value of company, is N159.24 billion, based on Olam’s consideration of N120 billion, BusinessDay calculation shows.
The figure represents an 11 percent increase from N143.23 billion enterprise value (EV) calculated by BusinessDay a fortnight ago using the market capitalization of N104 billion as at August 16.
This also shows that even though the price of Dangote Four has rallied by 93 percent over the last traded share price of N10.70 on 18 April 2019 (being the last business day prior to the date of date the initial binding offer), the Olam’s last offer of N24 per share still represents an additional premium if 11 percent to shareholders of Dangote Flour.
The final offer of N24 represents 124 premium to Dangote Flour’s last traded price of N10.70 before the initial offer date and 24 percent premium to Dangote Flour’s last traded price of N19.40 before the final offer date.
The enterprise value (EV) including equity (money that belongs to shareholders) and debt (obligations to creditors and financial institution), is the theoretical takeover price of a firm if it were bought.
EV is calculated as market capitalization (total number of ordinary shares multiplied by market price per share) plus total debt (both long and short term) minus cash and cash equivalent in the balance.
Olam International Limited (”Olam”) and its full owed subsidiary, Crown Flour Mills Limited (“CFML) submitted an initial binding offer on 23 April 2019 to the board of Dangote Flour Mills to aquire Dangote Flour’s outstanding and issued for a final consideration of N120 billion.
Tiger Brands, a South African firm had in 2012 bought a 63 per cent stake in Dangote Flour and pasta maker, but few years down the line the Dangote Group bought back the company after the new owner’s sustained losses repeatedly on its operations.
Dangote Flour Mills and other consumer goods firms are feeling the pains of a harsh and unpredictable macroeconomic environment as a high inflationary environment, decrepit infrastructure, double taxation and weak consumer spending continues to squeeze margins.
Low growth and high unemployment has further dampened consumer purchasing power, which is showing up in lower sales volumes for consumer firms.
The country’s GDP expanded by 2.01 percent in the three months through March 2019, from a year earlier; that compares with 2.4 percent expansion in the fourth quarter.
While inflation figure for the month of July fell to a 12 months low of 11.08 percent, the figure, however, falls below the central bank’s target range of 6 percent and 9 percent.
Over eighty percent of Chief Executive Officers surveyed by a polling agency say the gridlock at the Apapa Port is responsible for poor performance and their goods get trapped for an indeterminate period of time. Such delays causes disruption on the production floor and it also distorts the inventory cycle.
Dangote Flour’s share price closed at N20.80 as at August 16, and a market capitalization of N104 billion.
BALA AUGIE
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