Singapore’s Olam Offers N129.99bn For Outstanding Shares of Dangote Flour Mills

Barely seven years after it first divested its stake in Dangote Flour Mills Plc in 2012 to South Africa’s Tiger Brands Consumer Goods, Dangote Industries Limited, owned by Africa’s richest man- Alhaji Aliko Dangote, on Tuesday said it had entered into what it described as a binding commitment to sell the entire company for a juicy N130bn.
The lucky buyer this time is Singapore based commodity trader- Olam International, in a deal, which according to Reuters, “will be funded by internal cash resources and existing borrowing.”
The news was apparently well received by investors on the Nigerian Stock Exchange (NSE), as it sent DFM’s share price N1.05 or 9.8% higher, closing at N11.75 per share.
The transaction may see Olam, which is also well established in Nigeria, merging the new bride with its subsidiary- Crown Flour Mills Limited.

The transaction, subject to shareholders’ and regulatory approval, as well as the sanction of the court, will result in the eventual delisting of DFM from the NSE.
In its filing to the NSE, Dangote Flour, through Thabo Mabe, a director, DFM added that as part of the binding offer, Olam, which already holds 5,113,229 ordinary shares of DFM, which makes it a minority shareholder, now plans to acquire all of what is left of the five billion total shares in issue for N130bn.
This translates to N26 per share, representing N14.25 or 121.28% premium.
It also means Dangote Industries and the other minority shareholders will be paid a total of N129.867bn as consideration for the 4.99bn units held by them.
According to DFM, the amount “represents the enterprise value on a debt-free, cash-free basis, payable in cash at the closing of the proposed transaction.”
It also explained that the “consideration will also be adjusted for next working capital and net debt as of 31 March 2019 or any other later date that may be agreed by Olam and the board of DFM to arrive at the final price payable to equity shareholders.”
The transaction will be executed through a scheme of the arrangement, under Section 539 of the Companies & Allied Matters Act Cap C20 Laws of the Federation of Nigeria 2004 and other applicable laws, rules and regulations.”
DFM said the offer will be reviewed by its board, urging shareholders to exercise caution when dealing in its shares, while awaiting further announcements.
Recall that unlike in the case of Tiger Brands, which had along with DFM on September 25, 2012, announced the conclusion of a transaction leading to the acquisition of 63.35% shareholding in Dangote Flour Mills Plc for approximately R1.5bn, Dangote will have no interest. In the Tiger Brands scenario, Dangote retained a strategic 10% stake in the company for a minimum period of five years, while Aliko Dangote continued as Chairman.
Three years after, however, in December 2015, the South African group sold its entire 65.7% holding in Flour Mills, which it acquired at $200m, back to Dangote at $1 per share.
It received an immediate cash injection of $46.1million and took ownership of a debt of about $26.3m, even as Peter Matlare, CEO of Tiger Brands, admitted that his company got punished for not properly understanding the Nigerian business environment and competition.
This was because; the company posted a $40.5m loss in the first year after the investment and $34.3m in 2014.
Recall also that barely months after the deal; a very upbeat Tiger Brands increased its stake in the company to about 70%.
According to the result presented to the NSE earlier in April, for the year ended December 31, 2018, DFM reported 10% drop in sales revenue, which dropped to N112.341bn from previous year’s N124.693bn.
Cost of sales, however, increased from N95.066bn to N102.099bn, representing 7.4% rise; resulting in gross profit of N10.242bn, which was 65.43% down from N29.626bn in the corresponding full year of 2017.
Loss before tax for the period stood at N1.191bn, compared to the N16.835bn profit in 2017, while loss after tax came to N1.157bn, or 23 kobo loss per share; compared to N6.964bn and N3.03 earnings per share in the prior year.