Singapore-based commodities trader Olam International is expanding its footprint in Africa with the $275 million purchase of the wheat milling and pasta making assets of Nigeria’s BUA Group.
To be funded through a combination of debt and internal accruals, the purchase will see Olam’s total wheat milling capacity in the country increase to 6,140 tons per day by June from its current 2,380 tons per day.
The acquisition will also strengthen Olam’s position as the No.2 wheat miller by sales volume in Nigeria, said the Temasek-controlled company in its press release.
BUA is one of the top-five wheat millers in Nigeria.
“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,” said managing director of Nigeria-based and Olam-owned Crown Flour Mills, Anurag Shukla.
The grains portfolio is one of Olam’s six prioritized sectors for investment and growth.
Nigeria’s flour market is in excess of $2 billion a year and growing at 3.5 percent per annum. The pasta market is growing at 8 percent a year, said chief executive of Olam Grains, KC Suresh.
Nirgunan Tiruchelvam, director of Research at Religare Capital Markets said the purchase was “potentially commendable.”
“It seems to be a very interesting move to acquire an asset in West Africa at a time when the West African economies and emerging markets in general are under intense pressure. (But) they are investing in a sector that is extremely resilient…as countries become more prosperous, there is more wheat consumption,” he told CNBC’s Capital Connection.
Monday, 11 Jan 2016 | 2:14 AM ET