African markets

Flour Mills of Nigeria acquires Honeywell Flour Mills

Nigeria flour mills (FMN) and Honeywell Group Limited (HGL) today announced in a press release that they have signed an agreement under which the flour mills will acquire the holding company of the Honeywell group, Honeywell Flour Mills PLC (HFMP).

According to the press release, Honeywell Group Limited has agreed to sell a 71.69% stake in Honeywell Flour Mills to Flourmills of Nigeria. He said: “For the proposed combination of FMN through its affiliates and Honeywell Flour Mills Plc (“ HFMP ”), a holding company of HGL. At a total enterprise value of NGN 80 billion, HGL will sell a 71.69% stake in HFMP to FMN. Enterprise value includes the debt of the business. Honeywell Flour Mills currently has a market value of N29 billion

The press release also mentioned that the transaction will create a stronger business in the food industry. He said: “The proposed transaction will combine two companies with common goals and create a more resilient national champion in the Nigerian food industry, ensuring the creation and preservation of long-term jobs.”

What we know so far

Investors responded to the news as HONYFLOUR rallied early in the trading session, trading at 3.72, up 9.73% at the time of writing. FLOURMILL remains unchanged until now.

As previously mentioned, HGL will sell a 71.69% stake in HFMP to FMN on the basis of an enterprise value of NGN 80 billion. The press release further stated that the final share price per share payable will be determined based on the adjusted net debt and net working capital of HFMP on the completion date.

According to the press release, “The country and its food security program will benefit from the focus by the two companies on developing Nigeria’s industrial capacity, its agricultural value chain and in particular upstream integration. of the food industry ”.

Honeywell currently has a debt balance of 78.5 billion naira and a cash balance of 27.3 billion naira at the latest results. Flour Mills is also in debt with around 142.8 billion naira in debt and 52.6 billion naira in cash. It is not known how Flour Mills paid for the acquisition. Our initial prognosis suggests that this transaction is financed by debt.

Honeywell loans include a loan of N10.4 billion from First Bank, N2.3 billion from Bank of Industry, N6.2 billion from Fidelity Bank and N3.5 billion from the bank. Polaris. This is based on its latest audited accounts for the period ending March 2021. Flour Mills, on the other hand, owes around N50 billion in several intervention loans to the Bank of Industry and the CBN. The company also owns 68.6 billion naira in commercial papers and bonds.

What they say

Speaking on the transaction, Managing Director of Honeywell Group Limited, Obafemi Otudeko, said, “Today’s announcement is in line with the evolution of the Honeywell Group and our vision to create value that transcends the generations. For more than two decades, we’ve helped Honeywell Flour Mills build a strong business with a production capacity of 835,000 metric tonnes of food per year.

“As a result of the transaction, Honeywell Group will be firmly positioned to consolidate and expand its investing activities, particularly as a partner of choice for investors in key growth sectors. “

Omoboyede Olusanya, Managing Director of Flour Mills of Nigeria Group, said: “The proposed transaction is in line with our vision not only to be an industry leader but a national champion for Nigeria. We believe this will create an opportunity to combine the unique talents of two strong companies.

“As a result, we will have a more comprehensive and comprehensive skill set as a combined diverse food business, enabling us to better serve our consumers, customers and other stakeholders, while providing employees with access to wider opportunities. “

The press release also noted that the scale of the transaction provides employees at the consolidated company with more opportunities for career development in a larger organization, with the potential to create more jobs in the economy as it will have more brands and categories, and a larger and more diverse geographic footprint.