Pending regulatory approval from the appropriate regulators, the two major players in the Nigerian flour milling business, Honeywell Group Limited (HGL) and Flour Mills of Nigeria Plc. (FMN), have signed a merger agreement to create a strong national champion for Nigeria to further enhance food security.
The transaction will see HGL dispose of a 71.69 percent stake in HFMP to FMN based on an enterprise value of NGN80 billion. The final equity price per share payable will be determined based on HFMP’s adjusted net debt and net working capital at the date of completion.
The proposed transaction will combine two businesses with shared goals and create a more resilient national champion in the Nigerian foods industry, ensuring long-term job creation and preservation.
Currently, Nigeria presents vast opportunities, particularly in light of the country being the largest market on the continent as well as a signatory of the African Continental Free Trade Area (AfCFTA).
A combination of FMN and HFMP will bring together two trusted and iconic brands, creating a food business that is better positioned to benefit the growing Nigerian population and leverage opportunities stemming from the AfCFTA.
The complementary transaction combines FMN’s market-leading offerings that include grain-based foods, sugar, starches, oils, spreads and breakfast cereals with HFMP’s market-leading diverse and differentiated range of carbohydrate products.
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The scale of the transaction provides employees of the consolidated company with more career development opportunities in a larger organisation, with the potential to create more jobs in the economy as it will have more brands and categories, and a larger and more geographically diverse footprint.
Obafemi Otudeko, the managing director, Honeywell Group Limited, said the agreement is in line with the evolution of Honeywell Group and its vision of creating value that transcends generations.
“For over two decades, we have supported Honeywell Flour Mills to build a strong business with a production capacity of 835,000 metric tonnes of food per annum,” he said.
Otudeko states further that following the transaction, Honeywell Group will be strongly positioned to consolidate and expand its investment activities, including as a partner of choice for investors in key growth sectors.
Accordingly, he posits that stakeholders would benefit from the more than 85-year combined track record of FMN and HFMP and their shared goal of making affordable and nutritious food available to Nigeria’s population.
“The proposed transaction is aligned with our vision not only to be an industry leader but a national champion for Nigeria. We believe that this will create an opportunity to combine the unique talents of two robust businesses,” said Omoboyede Olusanya, the group managing director, Flour Mills of Nigeria.
According to Olusanya, the combination will serve as a catalyst for an even stronger stream of innovation that is focused on local content offerings. Hence, the country and its food security agenda will benefit from both companies’ focus on developing Nigeria’s industrial capability, its agricultural value chain and specifically backward integration of the food industry.
“As a result, we will have a better-rounded and more comprehensive skill set available to us as a combined diversified food business, thus enabling us to better serve our consumers, customers and other stakeholders, whilst providing employees with access to broader opportunities,” Olusanya said.
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