OLAM International Limited has made a final offer of N120 billion for the acquisition of 99.9 per cent equity stake in Dangote Flour Mills (DFM) Plc, which will make the flour-milling company a wholly-owned subsidiary of Olam International. Olam has a subsisting 0.10 per cent equity stake in DFM.
The board of directors of DFM on Monday August 5, 2019, confirmed that Olam, through its subsidiary Crown Flour Mills Ltd, has submitted the revised offer with final consideration of N120 billion, implying offer per share of N24. DFM’s share price rose by the maximum daily allowable price change of 10 per cent to close at N20.35 at the Nigerian Stock Exchange (NSE).
Olam plans to delist DFM from the NSE after the conclusion of the transaction. In a regulatory filing at the NSE, DFM stated that Olam has indicated that it would be undertaken the acquisition through its Ibadan-based subsidiary, Crown Flour Mills Limited. Olam has however confirmed its financial support to Crown Flour to meet the N120 billion transaction.
The revised and final offer of N120 billion was arrived at after the adjustment of N130 billion valuation for the takeover earlier in April 2019. The parties had agreed that the initial total consideration of N130 billion should be adjusted for net working capital and net debt as at March 31, 2019 or any other later date that may be agreed by Olam and the board of DFM and to also exclude
Olam’s shareholding in DFM. Shareholders will be paid the final consideration of N24 per share in accordance with the terms of the scheme document, which will be presented for shareholders’ approval at a court-ordered meeting to be convened for that purpose. “The board has carefully considered the addendum and the initial offer and will, subject to obtaining regulatory approvals, recommend the revised offer to the shareholders of the company at the court-ordered meeting, for their consideration and approval,” DFM stated.
The board of directors of DFM had in April accepted the full takeover of the flourmilling company. The acceptance of the acquisition offer is a major step and signals the possible success of the acquisition. It implies that the majority core investor in DFM, Alhaji Aliko Dangote, has consented to the deal. With the acceptance, a scheme for the transaction will be prepared for consideration by shareholders at a meeting to be ordered by a Federal High Court.
A formal application will also be made to capital market regulators-Securities and Exchange Commission (SEC) and Nigerian Stock Exchange (NSE) for the approval of the acquisition. If shareholders approve the resolutions on the acquisition at the court-ordered meeting, the resolutions will be presented for a final endorsement of the Federal High Court.
The directors will thereafter implement the provisions of the resolutions in line with the mandate at the court-ordered meeting. This is the second time Dangote will be selling DFM. Dangote, in 2012, sold its majority equity stake to Tiger Brands Limited, South Africa’s largest food company. Dangote Group’s DIL in 2012 sold 63.35 of its equity stake in DFM to Tiger Brands in a $181.9 million deal. The deal saw transfer of 3.17 billion ordinary shares out of Dangote Group’s 3.67 billion ordinary shares of 50 kobo each in DFM to the Tigers Brand.
The deal then was approximately valued at more than N28 billion, according to prevailing exchange rate. Barely two years after the acquisition, had Tiger Brands in 2014 written off about half of its investment in the former DFM. Tiger Brands impaired DFM’s value by 849 million rand, about $82 million, because of what it described as “underperformance” and “excess milling capacity that continues to increase in the Nigerian flour market.