Flour Mills of Nigeria (FMN), the nation’s leading food and agricultural company, has completed its acquisition of a 76.75 per cent stake in Honeywell Flour Mills Plc (HFMP), an affiliate of Honeywell Group Ltd., following a regulatory approval. The Group Managing Director (GMD) of FMN, Boye Olusanya, in this interview, discusses the deal and the prospects for the company and the country in general.
What is the significance of your recent announcement?
We have announced that FMN has obtained all the required regulatory approvals to acquire a 71.69 per cent stake in HFMP, formerly a portfolio company of Honeywell Group, and a 5.06 per cent stake in HFMP held by First Bank of Nigeria Limited (FirstBank) and can confirm the transaction has now been consummated by the parties.
We are delighted that approvals have been received and we are all set to begin the execution of this landmark transaction that would positively impact Nigeria’s food security architecture and overall competitiveness
Our combined brands and businesses will mean an expansive scale of food production for both Nigeria and Africa. Together, Flour Mills of Nigeria and Honeywell Flour Mills will be able to achieve rapid growth, while maintaining high quality products serving the evolving needs of our consumers.
What are the terms of the transaction?
In terms of this transaction Honeywell Group will dispose of its 71.69 per cent stake in HFMP to FMN. Given FMN’s parallel negotiation for both stakes, culminating in the agreements being executed, the transaction was concluded at N4.20 being the final equity price per share.
Why are you doing this?
We firmly believe that this is the right transaction at the right time. The acquisition of HFMP by FMN is expected to combine two businesses with shared goals and create a more resilient national champion for Nigeria in the foods industry, ensuring long-term job creation and food security.
The acquisition will bring together two trusted and entrenched brands, creating a single entity that is better positioned to benefit the growing Nigerian population and leverage opportunities stemming from the AfCFTA.
Continued investment in the business by the acquisition of HFMP will further enable FMN to be a crucial provider of the continent’s food needs.
How will it benefit the companies’ stakeholders?
This is the right step for the business and in the best interest of employees, customers and shareholders as there are areas for growth which extend beyond Nigeria.
The transaction creates a single more resilient national champion for Nigeria, ensuring long-term job preservation.
The company will create additional opportunities across stakeholder groupings who would benefit from the more than 85 years of combined track record of FMN and HFMP.
The country will benefit from FMN’s strategic plan focused on developing the agricultural value chain and backward integration of the food industry, ultimately improving food security and increasing employment opportunities across Nigeria
Customers across the nation will benefit from access to a wider product range, an even stronger stream of innovation and a robust pan-Nigerian distribution network, accessing a greater number of points of sale supported by enhanced customer-focused sales teams and redistribution capabilities.
What will the impact on customers be?
The acquisition will increase scope to deliver product innovation to meet customers’ needs.
Customers across the nation will benefit from access to a wider products range, economy of scale, an even stronger stream of innovation and a robust pan-Nigerian distribution network, accessing greater number of points of sale supported by enhanced customer focused sales teams and redistribution capabilities.
How will you ensure that the integration is successful?
We have a robust acquisition integration plan and have allocated sufficient resources alongside regular reviews to ensure a successful integration.
What synergies do you expect to derive from this acquisition?
Synergy-related efficiencies are an important part of the rationale behind the acquisition. Creating a long-term, structural cost advantage will help secure the prospects for both current and future employees.
The acquisition would create a single more resilient national champion for Nigeria, ensuring long-term job preservation and create additional opportunities across stakeholder groupings who would benefit from the more than [85] years of combined track record of FMN and HFMP.
Would there be any leadership change or adjustment(s)?
Our future business structure and leadership will be announced in due time.
What name will the ultimate entity take on?
Having acquired 71.69 per cent in HFMP the company is now an integrated part of Flour Mills of Nigeria Plc (FMN)
How do you envisage to benefit from AfCFTA?
Nigeria presents vast opportunities given that it is the largest market on the continent. The African Continental Free Trade Area (AfCFTA) provides an avenue to an additional market and will position FMN as a national champion. Continued investment in the business will enable FMN to be a crucial provider of the continent’s food needs.
How have you coped financially since announcing this deal?
Flour Mills of Nigeria Plc in 9M demonstrated solid performance across Food, Agro-Allied and Support Segments delivering topline growth of 51 per cent in Q3 and 49 per cent in 9M, behind strong volume growth and mix.
Persistent good operating performance in the food segment; continuous improvement in the agro-allied and support segments alongside strong volume growth resulted in an impressive Profit Before Tax of N25bn in nine months and N9.8bn in Q3 – up seven per cent and eight per cent respectively.
Agro-allied segment in 9M contributed 42 per cent (N10.7bn) to the group’s Profit Before Tax following the increase in local demand and improved export operations.
The group remains committed to executing its overall long-term strategy to maintain growth and sustain profitability by increasing local content through product innovation across our core value chains, as evidenced by the third quarter’s earnings trend.
In our new operating environment, our increased operational efficiency and accelerated optimisation plans have resulted in competitive product offerings and profitability. We will continue to invest in production capacity and make investment decisions that will strategically position the group for the opportunities that will arise from the AfCFTA.
