Singapore’s Olam buys Nigeria biscuits maker for $167m
Category: Nigerian Economy
February 10, 2012 Siaka Momoh
Olam International, a leading global integrated supply chain manager and processor of agricultural products and food ingredients said on Thursday it has acquired a leading Nigerian biscuits and candy maker, through the acquisition of 100 percent equity interest in Titanium Holding Company SA and its subsidiaries, for a price consideration of US$167 million (subject to working capital adjustments at completion).
Olam’s Senior Vice President and Head of Packaged Foods, M Ramanarayanan said: “This acquisition presents a unique opportunity for our Packaged Foods business to scale up and move immediately into a leadership position in two attractive packaged foods categories in the largest consumer market in West Africa. The transaction is also immediately management, earnings and cash flow accretive.
“We believe the combined capabilities of Olam and OK Foods will offer a differentiated approach to addressing the needs of the market by putting together the best practices in manufacturing, product development and innovation, branding and marketing, with deep local insight into the business,” he added.
Olam says it expects to deliver 17-18 percent in EBITDA margin and generate in excess of 29 percent Equity IRR on this investment.
Titanium Holding, with estimated market share of 18 percent and 28 percent in biscuits and sugar candy under ‘OK’ brand umbrella, owns Nigeria ’s second largest biscuits and candy franchise with a turnover of approximately US$162 million in 2011.
Olam in a statement on its website, says the acquired business with its brand equity, management bench strength and operating assets, is a good strategic fit to the Packaged Foods business in Nigeria.
“Its leading position and scale in these categories offers significant sales and distribution synergies with Olam’s current portfolio of categories and provides a platform through which Olam could further develop efficiencies in manufacturing, product innovation and branding.”
The company says it also expects to leverage on Titanium manufacturing infrastructure in Nigeria to establish a biscuits and candy export hub into other West African markets, to achieve greater economies of scale.
The company, with about 17,000 employees, owns and manages three biscuit and candy factories, with modern production lines fitted with raw materials management and packaging systems, and a logistics infrastructure, which includes a fleet of trucks and other warehousing and distribution assets in Nigeria.
Local biscuit production in Nigeria, as at 2009, was 200,000 metric tones, whilst capacity utilisation was 40 per cent. Production has fallen from its high level of 475,000 metric tonnes and 75 per cent capacity utilisation in 2006 to the level it is now.
The Nigerian arm, Olam Nigeria Limited, which has a robust spread across the country, is a popular name among farmers at the farmgate. It directly employs 500 people in its operations and generates 10,000 indirect employments. The company engages smallholder farmers by supplying farm inputs and providing ready markets for their products. Olam’s engagement with rice farmers has shot up farm earnings per hectare from US$235 to US$1,000.
The forces driving Olam’success from behind are Kewalram Chanrai (KC) Group, Temasek Holdings, the management team of Olam. As of July 21, 2009, globally, Olam International’s total issued shares were close to 2 billion.
Olam has succeeded in building an internationally integrated supply chain, sourcing 17 products including cocoa, rice, cashew, cotton, coffee, timber, sugar, sesame, teak and shea nut, and operating in 60 countries including Nigeria . Olam Nigeria Limited is the regional headquarters of the company in the West African sub-region.