Reports emanating from movement at the Nigerian Stock Exchange today indicate that the richest man in Africa, Alhaji Aliko Dangote might sell part of his food business (Dangote Flour) to foreign investors.
Today, Dangote Flour Mills Plc. rose to the highest in more than a month following word South Africa’s Tiger Brands may buy stake in the Nigerian producer.
Dangote stock jumped 4.9 per cent to 4.74 naira ($0.03) by the close in Lagos, matching yesterday’s percentage gain and the strongest close since March 28. Tiger Brands gained 0.7 per cent to 289.63 rand ($37) as of 4:53 p.m. at the JSE, paring an earlier rise of as much as 2 per cent and giving the company a market value of 55.2 billion rand ($7.1 billion).
According to Esili Eigbe, a Lagos-based analyst at Stanbic IBTC Bank Plc: “There are rumours that Tiger Brands are the potential acquirers”
“If it goes ahead to make the acquisition, it will be a substantial addition to its portfolio of products, especially in grains”, he added.
A Lagos-based analyst at Vetiva Capital Management, Adedoyin Adelakun also gave credence to the development. He said, “Dangote plans to sell 80 per cent of its food business to foreign investors.” Although no potential investor was mentioned, the decline (by 5 per cent this year) of Dangote Flour stocks, compared with a 10 per cent rise in the Nigerian Stock Exchange All-Share Index over the same period, puts it at disadvantage.
Dangote Flour was trading at 51 naira in March 2008; by April 2010 it had slipped to 25.8 naira.
However, the Lagos-based company is optimistic as it expects a 78 per cent rise in profit in the fourth quarter of its 2011 fiscal year. It said in a statement that its Net income will be 4.84 billion naira ($30.1 million) for the three months through December, up from 2.72 billion naira ($17.4 million) a year earlier. The company’s 2011 full-year results have been due for release since March.
Bongiwe Njobe, Tiger’s group executive for corporate sustainability, said. “We have actively been pursuing a whole lot of interests in Nigeria,” Njobe said without confirming whether the company made an offer to buy Dangote Flour. “We will make an announcement when appropriate.”
The South African company declared its financial buoyancy stating that it is prepared to spend twice as much on acquisitions this fiscal year. According to Tiger’s Chief Executive Officer Peter Matlare: “Our balance sheet can easily take another 4 billion rand” in fiscal 2012.
Based on today’s share price, Dangote Flour has a market value of $151 million. Thus, the acquisition might as well be feasible before the end of fiscal 2012.