How BUA-Olam $125m deal can boost flour milling industry

BUA Group, one of Nigeria’s foods and infrastructure conglomerates, recently announced the divestment of its flour business to Olam International in a deal worth $275million.

The investment of the Singapore-based holding company was for the acquisition of Amber Foods Limited, which through its 100 percent owned subsidiary, Quintessential Foods Nigeria Limited, owns the wheat milling and pasta manufacturing assets of the BUA Group in Nigeria.

The BUA Group has wheat milling capacity of 3,760 metric tonnes (MT) and pasta making capacity of 700 MT.

The details of the deal show that assets to be acquired by Olam include two wheat mills and a pasta-making facility in Lagos, a mill in Kano, and a wheat mill and a pasta manufacturing plant under construction in Port Harcourt.

The deal is expected to strengthen Nigeria’s flour milling industry and inject strong experience and management in the sector. There is also hope that this deal will create more jobs in the wheat milling value chain.

Olam had, six years ago, acquired Crown Flour Mills (CFM) in Nigeria and consequently expanded its capacity and set up milling operations in Ghana, Senegal and Cameroon.

With this deal, stakeholders believe that Crown Flour Mill’s position as the number two wheat miller by sales volume will be consolidated

“This is good for our economy. This sector needs monetary ease to be able to import raw materials,” said Ike Ibeabuchi, a manufacturing sector analyst.

Others believe that Crown Flour Mill’s total wheat milling capacity of 2,380 TPD will rise above 6000 TPD once the plant takes off later in the year.

According to Mukul Mathur, country head of Olam Nigeria,  this will support the country’s wheat milling industry.

“We are confident about the growth prospects in Nigeria, so expanding our participation here is a logical step to capitalise on the opportunity. Our value-added export business in the country puts us in a strong position to generate the much required forex and actively support the Produce-Add-Value-Export (PAVE) initiative of the federal government of Nigeria,” Mathur said.

Anurag Shukla, managing director of Crown Flour Mills, added that the acquisition would help it 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. “We are pleased to acquire the BUA Flour and BUA Pasta brand. Both brands are very well known and respected in the industry and we look forward to further developing them and increasing their reach across Nigeria, leveraging our extensive sales and distribution network. “We will also invest in building the skills and capabilities of our employees and in providing a safe working environment.”

Speaking at the signing ceremony, Abdulsamad Rabiu, Founder, BUA Group, said, “This signing marks a major milestone in our medium term strategy. Over the years, we have run one of the largest and most efficient flour milling businesses in Nigeria and are confident in the value it will add to the buyer’s operations. Our Group’s strategic focus will now be to diversify to business areas with greater potential for export where the sourcing and utilisation of foreign exchange is less and most of the materials needed for production can be sourced locally whilst also positioning our current line of Foods and Infrastructure businesses for market leadership.”

 

ODINAKA ANUDU