Olam increases its stake in the Nigerian flour industry

Olam International Ltd, a Singapore-based agriculture company, acquired BUA Group, one of Nigeria’s bigger flour producers, on Tuesday, for $275 million, increasing its stake in the country’s active sector.

Olam’s acquisition of BUA’s wheat-milling and pasta-manufacturing assets will nearly double the Singapore-based company’s sub-Saharan daily milling output to 7,640 metric tons by June, once it completes the construction of a new milling plant in Port Harcourt, Olam will then be on course to become the country’s second-biggest flour producer . The BUA acquisition follows Olam’s 2010 purchase of Crown Flour Mills (CFM) in Nigeria for $107.6 million.

Olam currently owns two wheat mills and a pasta manufacturing facility in Lagos and a non-operating mill in Kano state. Outside of its flour business, Olam has operations in several sub-Saharan African countries including Ghana, Senegal and Cameroon as well as businesses in 70 countries globally supplying a variety of agricultural products.

Nigeria’s flour industry has attracted outside investment due to the big demand for bread and other flour products from the country’s more than 100 million people with a revenue of about 300 million as at March 2014.. Despite the attractiveness of the market, it hasn’t proven to be an easy one for companies coming in from outside Nigeria as the two biggest producers control over 75 percent of the market and the country has strong brand loyalty that is regionally divided.

The Nigerian flour market is worth around US$2 billion a year and is growing at 3.5 per cent annually while the pasta market is growing at 8 per cent a year, explaining Olam’s vested interest in the sector. However, Olam needs to take a cue from Tiger Brands experience with Dangote Flour Mills (DFM) since paying nearly $200 million for a 65 percent stake in the firm three years ago as part of broader strategy to expand in sub-Saharan Africa.
Olam’s delve into Nigeria’s milling industry will help create jobs, diversify BUA’s business further, stimulate the Nigerian economy as well as support the government’s plan for agriculture and extractive industries, Billionaire industrialist and founder, BUA Group, Mr. Abdulsamad Rabiu said.

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