Transaction will create strong National Food Champion
Honeywell Group Limited has just announced an agreement for the proposed combination of Honeywell Flour Mills (HFMP) and Flour Mills of Nigeria (FMN) for a total enterprise value of N80 billion. Through this transaction, Honeywell Group will dispose of a 71.69% stake in HFMP to FMN, as it seeks to continue its journey of strategically refining and growing its investment portfolio while consolidating in sectors the company currently operates.
At its core, this proposed merger, which is subject to regulatory approval, will see two businesses come together who have over the years established themselves as innovators and leaders in the food manufacturing industry. Beyond this, however, it creates a platform for one combined entity to help in Nigeria’s push for food security and the goal of feeding a nation with a booming population of over 200 million. The merger also comes at a strategic time when the opportunities stemming from the African Continental Free Trade Area (AfCFTA) are finally coming to the fore.
Speaking about the transaction, Honeywell Group Limited Managing Director Obafemi Otudeko said, “This 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.”
To bolster this point, Omoboyede Olusanya, Group Managing Director of Flour Mills of Nigeria, said about the deal, “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.”
Together, both companies have a combined track record of more than 85 years and, once completed, this merger will see them bring together the resources and manpower that have led to a wide variety of market-leading products ranging from a combination of Flour Mills of Nigeria’s grain-based foods, sugar, starches, oils, spreads and breakfast cereals to HFMP’s diverse and differentiated range of carbohydrate products.
Usually, transactions like this raise questions of job security. How many staff will be retained? How many will be let go? Those are important questions worth asking. However, according to official statements, the merger is “about creating a stronger combined business” to enhance growth prospects and potential future job creation. It isn’t expected to impact the workforce or operations of either business heavily. According to Honeywell, the sheer size of the transaction will even provide employees of the consolidated company with more opportunities to develop their careers and improve the quality of their skills within the parameters of a new and enlarged organisation.
In theory, this also means the new company will have even more fuel to inject more jobs into the economy.
One of the overall impacts of this deal is the potential for innovation that it creates. Currently, food demands in Nigeria exceed supply.
However, the creation of this new entity, first of all, better positions it to produce food at higher capacity and eventually develop a strategic network that encourages export across the world, particularly to Nigerians in the diaspora who remit billions of dollars [2] back to the country every year.
HFMP will remain listed for the foreseeable future as it promises to maintain “the highest standards of corporate governance in the best interest of all shareholders, including minority shareholders.” To this end, and per the current capital markets rules, it will initiate a Mandatory Takeover Offer (MTO) to allow the minority shareholders to offer their shares at the transaction price.
As this deal closes, Honeywell Group intends to continue its journey of refining and growing its investment portfolio. This will see it consolidate in sectors where it currently operates, such as real estate, energy, financial services, infrastructure. It also intends to announce more strategic initiatives in the coming months.
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