Nigeria’s leading agro-allied group, Flour Mills of Nigeria Plc, has signed a definitive agreement to take over Honeywell Flour Mills from Honeywell Group, a leading Nigerian investment holding founded by multimillionaire industrialist Obafoluke Otudeko.
Flour Mills of Nigeria is Nigeria’s largest food and agro-allied group. Since the group commenced operations in 1960, it has grown into a leading operator in the Nigerian economy under the control of the late George Coumantaros and his son, John.
John Coumanataros, the chairman of Flour Mills, owns a majority 63.34-percent stake in the group worth N75.97 billion ($184.9 million).
The planned takeover and acquisition will create a strong national champion in Nigeria that will combine Flour Mills’ market-leading offerings, including grain-based foods, sugar and breakfast cereals, with Honeywell’s diverse and differentiated range of carbohydrates products.
The combination of the two businesses is expected to create a behemoth with N702.85 billion ($1.71 billion) in assets and a revenue of about N850 billion ($2.07 billion).
In line with the proposed transaction terms, the Otudeko-led Honeywell Group will dispose of a 71.69-percent stake in its flour milling business, Honeywell Flour Mills, to Flour Mills of Nigeria, based on an enterprise value of N80 billion ($194.7 million).
In addition, Flour Mills will also acquire an additional 5.06-percent stake in Honeywell Flour Mills belonging to First Bank of Nigeria Limited. The other stake will take the miller’s ownership interest to a 76.75-percent stake, amounting to 6,086,426,703 ordinary shares.
Honeywell Group Limited Managing Director Obafemi Otudeko, the son of Founder Obafoluke Otudeko, commented on the proposed transaction. He noted that the value unlock aligns 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. “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.”
Flour Mills of Nigeria Group Managing Director Omoboyede Olusanya, said the transaction supports Flour Mills’ 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,” he said. “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.”
According to the information gathered by Billionaires.Africa, the final equity price per share payable for the 76.75-percent stake will be determined on the basis of Honeywell Flour Mill’s adjusted net debt and net working capital at the date of the completion of the transaction.
As of Sept. 30, Honeywell Flour Mills had a total debt of N78.53 billion ($191.1 million), split into N19.50 billion ($47.45 million) of long-term debt with a payment date of more than a year, and short-term debt of N59.03 billion ($143.66 million) payable within a fiscal year.
With a total of N52.68 billion ($128.2 million) in cash holdings, the leading Flour Mills agro-allied group might have to fund the transaction through debt funding. This is expected to add to the group’s debt portfolio, which is presently above the N140-billion ($340 million) mark.