Olam acquires Amber Foods for $275m

Olam International has purchased Amber Foods, which through its Quintessential Foods Nigeria unit owns the wheat milling and pasta manufacturing assets of the BUA Group in Nigeria, for $275m.

The BUA Group is a diversified foods and infrastructure business group in Nigeria. It is among the top five wheat millers in the country. It has a wheat milling capacity of 3,760t per day and a pasta production capacity of 700t per day.

The assets purchased comprise two wheat mills and a pasta manufacturing facility in Lagos, a non-operating mill in Kano in the northern part of Nigeria, and a wheat mill and pasta manufacturing plant, under construction, in Port Harcourt in the southeast part of the country.

This purchase will bolster Olam’s position as a leading wheat miller and pasta manufacturer in Nigeria.

Olam’s total wheat milling capacity in the country will grow from its current 2,380t per day to 6,140t per day once the facilities in Port Harcourt become operational in June 2016.

Olam’s total wheat milling capacity in the Sub-Saharan Africa region will grow twice to reach approximately 7,640t per day.

Olam Grains managing director and CEO K C Suresh said: "Nigeria is a high growth milling market with volumes expected to reach five million metric tonnes in 2020 as population growth and urbanisation increase the demand for wheat-based products.

"The size of the Nigerian flour market is in excess of $2bn, growing at 3.5% per year, while the pasta market is growing at the rate of 8.0% per year.

"We are very pleased to acquire these strategically located, port-based assets, as undeveloped land at Nigerian ports is increasingly difficult to access.

"They are highly complementary to our existing asset base in Lagos and Warri, and will not only strengthen our current market position and deliver multiple synergies, but also enable us to access high growth areas in the north and southeast of Nigeria."

Olams Nigeria country head Mukul Mathur said: "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 manage the forex availability."

The transaction has been funded through a combination of debt and internal accruals, and is expected to be earnings accretive from the first year after consolidation.

Olam expects the acquired business to generate earnings before interest, taxes, depreciation and amortisation (EBITDA) to invested capital return of 13-16% when it touches steady-state in 2018.

A part of the purchase consideration will be paid after commissioning of the facilities in Port Harcourt.