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Flour Mills, Honeywell reach N80 billion shares transfer deal

By Femi Adekoya and Helen Oji
23 November 2021   |   2:55 am
Flour Mills of Nigeria Plc (FMN) and Honeywell Group Limited, yesterday, announced the signing of an agreement for the proposed combination of FMN through its affiliates and Honeywell Flour Mills Plc

FlourMills to acquire First Bank’s equity in Honeywell
…Synergy will boost industry competitiveness in global market, say shareholders

Flour Mills of Nigeria Plc (FMN) and Honeywell Group Limited, yesterday, announced the signing of an agreement for the proposed combination of FMN through its affiliates and Honeywell Flour Mills Plc (HFMP), a portfolio company of HGL, at a value of N80 billion, in a move that will see HGL dispose of 71.69 per cent stake in HFMP to FMN.

The proposed transaction is expected to combine the two businesses and create a more resilient operator in the Nigerian foods industry, ensuring long-term job creation and preservation.

Olam had expanded its capacity having acquired Dangote Flour Mills (DFM) in 2019.

Under the proposed transaction which is subject to approval from the appropriate regulators, the final equity price per share payable will be determined based on HFMP’s adjusted net debt and net working capital at the date of completion.

The parties also noted that HFMP’s listing will be retained for the foreseeable future, while minority shareholders of HFMP will be treated fairly and in line with capital market regulation.

Besides, following the agreement between the two millers, FMN has sealed a deal with First Bank of Nigeria Limited (“FirstBank”) to acquire the Bank’s 5.06 per cent equity in HFMP.

Consequently, upon completion of the acquisition, and subject to obtaining all requisite regulatory approvals, FMN is set to hold a circa 76.75 per cent equity interest in HFMP.

It would be recalled that the CBN had in May this year, issued a 48-hour ultimatum to Honeywell to fully repay its obligations to First Bank as the failure to do so could cause the apex bank to take regulatory measures against the insider borrower and the bank.

Given FMN’s parallel negotiations for both stakes culminating in the agreements being signed on the same date, the basis for arriving at key commercial terms including final equity price per share will be the same. The price payable to FirstBank will be the same as HGL’s.

With the new development, shareholders and potential investors are advised to exercise caution when dealing with FMN’s shares until a further announcement is made.

Commenting on the transaction, Honeywell Group Limited Managing Director, Obafemi Otudeko said: “Today’s announcement is in line with the evolution of Honeywell Group and our vision of creating value that transcends generations. For over two decades, we have supported Honeywell Flour Mills to build a strong business with a production capacity of 835,000 metric tonnes of food per annum. Following the transaction, Honeywell Group will be strongly positioned to consolidate and expand its investment activities, including as a partner of choice for investors in key growth sectors.”

Omoboyede Olusanya, Group Managing Director of Flour Mills of Nigeria, said: “The proposed transaction is aligned with our vision not only to be an industry leader but a national champion for Nigeria. We believe that this will create an opportunity to combine the unique talents of two robust businesses. As a result, we will have a better-rounded and more comprehensive skill set available to us as a combined diversified food business, thus enabling us to better serve our consumers, customers and other stakeholders, whilst providing employees with access to broader opportunities.”

Shareholders’ group under the aegis of Issuers and Investors Adri Initiative (IIADRI) has stated that the business combination would enable the Nigerian food and agro-industry to become more competitive in the global market.

The President of the group, Moses Igbrude described the agreement as a welcome development, urging the two players to ensure efficient management of the transactions to increase shareholders’ value in the long run and enhance profitability.

“Acquisitions and mergers is part of capital markets, the news of the acquisition is a welcome development that will make FMN a clear leader in the food and agri-business in Nigeria.

“It will be more beneficial to shareholders in the long run if the two companies consummate the transaction in an efficient manner.”

The complementary transaction combines FMN’s market-leading offerings that include grain-based foods, sugar, starches, oils, spreads and breakfast cereals with HFMP’s market-leading diverse and differentiated range of carbohydrate products.

The firm explained that stakeholders would benefit from the more than 85-year combined track record of FMN and HFMP and their shared goal of making affordable and nutritious food available to Nigeria’s population.

The scale of the transaction provides employees of the consolidated company with more career development opportunities in a larger organisation, with the potential to create more jobs in the economy as it will have more brands and categories, and a larger and more geographically diverse footprint.