Why We Are Divesting Our Stake In Teragro- Transcorp

The board of Transnational Corporation of Nigeria (Transcorp Plc), on Wednesday formally announced its intention to divest its stake in Benue-based juice concentrate making subsidiary- Teragro Commodities Limited.
This, the company said in a statement by Mutiu Bakare, its group chief finance officer, to the Nigerian Stock Exchange (NSE), followed a long-term review of its operations in that business, which revealed a number of issues, resulting in the decision to exit.
The board assured that discussions are ongoing, but not yet finalized with the Benue State Government, a key stakeholder, to identify “suitable partners that would drive the value proposition of the business going forward.”
The statement recalled that the intention was reported in Transcorp’s 2017 annual report, expressing hope that the transaction would be closed in a timely manner to maximize benefits for stakeholders.
The decision, the company further assured, will not “have any significant impact on the group’s business as Teragro contributed less than 0.03% of group revenue and (accounts for) 0.21% of gross assets.”
Fielding questions around the “Teragro dream” at an Investor Conference, the President/Chief Executive Officer of Transcorp Plc, Adim Jibunoh, lamented the fact that the business has had to contend with major challenges such as cheaper imported concentrate brands, absence of government protection for local manufacturers, as well as the socio-political environment in which the company operates.
This is why, he noted, “if we continue (with Teragro), will would be a loss making business. It’s a buyer’s market because buyers (and not sellers) dictate the price.”
He also noted the seasonality of fruits, just as the political tensions in that part of the country as other factors that aided the decision to exit the business, which the board believes “no longer made sense.”
Although the board is looking for other willing parties, the group “is still keen on other opportunistic windows in the agribusiness space,” Jibunoh assured.
Also commenting on the decision, Valentine Ozigbo, chief executive of Transcorp Hotels Plc, noted the problem of meeting buyer specifications, quality of the concentrate and security challenges, all of which moved against the forecast based on which the group ventured into the business in 2011.
Christopher Ezeafulukwe, executive director in charge of the group’s oil and gas business recalled government policy at the time to stop importation of juice concentrates, which attracted the Transcorp group.
Based on that policy at the time, he continued, the first set of 5Alive pulpy juice produced by Coca-Cola was with Teragro concentrates, making Teragro the sole local material source for the juice, amidst hope that government would sustain the policy and provide the enabling environment, which did not happen.
On her part, Mrs. Owen Omogiafo, another ED, corporate responsibility of the board required that the business be reassessed and a decision taken as to whether to continue, or preserve the company’s shareholders’ funds.
Teragro was established in 2011 as a partnership between Transcorp Plc and the Benue State Government to process orange and pineapple concentrates, mango purees of up to a total 26.5m tons per year.
The plan at the time was to help Nigeria conserve its up to $1bn spend at the time on importation of juice concentrates.
As part of the deal, Benue State Government provided 10,000 hectares of farm, while the company signed an agreement with an Israeli company for the feasibility studies.
Teragro was established in 2011 as a partnership between Transcorp Plc and the Benue State Government to process orange and pineapple concentrates, mango purees of up to a total 26.5m tons per year.
The plan at the time was to help Nigeria conserve its up to $1bn spend at the time on importation of juice concentrates.
As part of the deal, Benue State Government provided 10,000 hectares of farm, while the company signed an agreement with an Israeli company for the feasibility studies.
In March 2012, the then President Goodluck Jonathan, in Makurdi, Benue State commissioned a 30,000 metric tons per annum Ben Fruit Teragro concentrate plant, which was expected to save Nigeria an estimated $1bn per annum spend on imports.
Besides meeting the huge domestic demand, Tony Elumelu, chairman of Transcorp Plc had assured at the time of the company’s plans to increase capacity, especially as there was already demand for the concentrate from Europe. The export, he said, would however begin with other West Africa countries.
In addition to saving scarce foreign exchange, the plant was billed to create direct and indirect employment, beginning with between 75 and 100 people, even as farmers/partners would get better value for their produce, between 50 to 60% of which previous went bad before reaching the market.
The plant had an installed capacity of 20 trucks of oranges and mangoes for processing daily, with plans to increase factory capacity five-fold.
Teragro was also wired to partner other states keen on taking charge of their natural agric endowments.
GMD of Transcorp at the time, Obinna Ufudo, explained that almost N1bn was invested on the plant originally built five years earlier by the Benue State Government, and leased to Transcorp for 10 years, the first of which was spent on upgrading.
The company, he added, would be replicated in other states, just as plans to go into rice production, tomato puree, and cassava processing, among others.
He lamented the situation where Nigeria, which is the second largest producer of citrus globally, still imports concentrates.

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