Flour Mills of Nigeria Plc has accounted its acquisition of 71.69 per cent in Honeywell Flour Mills Plc, controlled by billionaire investor, Mr. Oba Otudeko, according to a joint statement by both quoted entities.
The transaction is has an enterprise value of N80 billion, according to a regulatory filing.
FMN has also entered into agreement with the First Bank Holdings Company to acquire its 5.06 per cent equity stake in Honeywell Flour Mills.
The buyout is seen as a move by Otudeko to settle huge debts owed First Bank, where he once held sway a chairman for years, and for which the Central Bank of Nigeria has demanded closure after he was removed from the board.
In the regulatory filing on Monday, FMN and HFM confirmed that an agreement had been signed to cement the deal.
“FMN and HGL today announced that they have signed an agreement for the proposed combination of FMN through its affiliates and Honeywell Four Mills Plc (HFMP), a portfolio company of HGL.
“At a total enterprise value of N80 billion, HGL will dispose of a 71.69 per cent stake in HFMP to FMN, the statement said.
Enterprise Value includes the debt of the company. Honeywell Flour Mills currently has a market value of N29 billion
The firm’s said that the transaction will create a stronger company in the food industry.
“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.”
Investors have reacted to the news as Honeywell Flour shares has rallied at the start of the trading session, trading ₦3.72, up 9.73% as at afternoon trading. Flourmills remains unchanged so far.
The statement said that 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.
Honeywell currently has a debt balance of N78.5 billion and a cash balance of N27.3 billion as of the latest results. Flour Mills is also debt-laden with about N142.8 billion in debt and N52.6 billion in cash. It is unclear how Flour Mills paid for the acquisition. Market experts suggest this transaction is funded from debt.
According to the statement, the proposed combination is subject to approval by the appropriate regulators.
The Managing Director of Honeywell Group Ltd., Mr. Obafemi Otudeko, said the announcement was in line with the evolution of Honeywell Group.
“Today’s announcement is in line with the evolution of Honeywell Group and our 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.
“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,” said Otudeko.
Mr. Omoboyede Olusanya, Group Managing Director, Flour Mills of Nigeria, said the proposed transaction was aligned with the vision to be a national champion for Nigeria.
“We believe that this will create an opportunity to combine the unique talents of two robust businesses.
“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.
The statement further said the complementary transaction combined FMN’s market-leading offerings that included grain-based foods, sugar, starch, oil and breakfast cereals with HFMP’s market leading diverse and differentiated range of carbohydrate products.
It added 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 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.
“Customers across the nation will benefit from access to a wider product range and a robust pan-Nigerian distribution network, accessing greater number of points of sale supported by enhanced customer-focused sales teams and redistribution capabilities.
“The combination will also serve as a catalyst for an even stronger stream of innovation that is focused on local content offerings,” it said.
– Media Report