Honeywell Group Limited (HGL) and Flour Mills of Nigeria Plc (FMN) announced the signing of an agreement that will see them combine FMN and Honeywell Flour Mills Plc.
The agreement was stated to be valued at ₦80 billion is subject to regulatory approval and will see Honeywell Group Limited transfer a 71.69% stake in Honeywell Flour Mills Plc to Flour Mills of Nigeria.
By joining forces, both companies will continue in their effort to boost Nigeria’s food production capacity but at a much higher level. Despite having so much arable land, Nigeria’s food production capacity remains insufficient to cater to its growing population of over 200 million people. The majority of this population growth is happening in urban areas. In 2020, Nigeria’s urban population was 52%. This section of the country’s population has grown steadily over the last 50 years from 18.2 to 52%.
This rising urban population also means an expansion in the volume of middle-income families, which implies a growing need for food that is easy to prepare. Experts predict that the market for ready-made meals will only continue to grow with the population. However, much of this is tied to an improvement in infrastructure and food production capacity.
Speaking about the transaction, Obafemi Otudeko, Managing Director of Honeywell Group Limited, 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.”
Nigeria is ranked 131st out of 190 economies according to the World Bank’s 2020 ease of doing business report. Even though Nigeria’s place in the rankings has improved in recent years, there is still a long way to go. Companies continue to face various challenges, ranging from poor infrastructure, inadequate power supply, a struggling agricultural value chain, increased cost of production, and so on.
All these challenges indicate the need for greater investment in the food manufacturing sector. This combination will help increase Nigeria’s food production capacity and eventually lead to more revenue from exporting finished goods, both of which will significantly impact the country’s GDP and make it more attractive to investors.
In the statement, Omoboyede Olusanya, CEO 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.”
To further spotlight the potential impact of this transaction on the economy, it is worth noting that food manufacturing is one of the most prolific job-creating sub-sectors in Nigeria. According to the Food and Agriculture Organisation of the United Nations (FAO), the food processing sub-sector has created at least half of all manufacturing jobs in Nigeria.
Flour Mills of Nigeria is the country’s largest flour miller, with a capacity of over 8,000 metric tons per day. The company introduced pasta production to Nigeria in 1999 and has expanded its production capacity from 40,000 metric tonnes to over 350,000 metric tonnes.
Combine this with Honeywell Flour Mills Plc’s production capacity, and this creates a new manufacturing champion in Nigeria. Just last year, Honeywell’s two-year-old pasta production factory in Sagamu delivered 138,600 metric tonnes of pasta and generated over ₦19.08 billion in revenue. Its Apapa and Ikeja plants also generated a combined ₦90.51 billion.
The scale of the proposed combined entity provides greater opportunities for the 17,000 direct and indirect employees and will potentially create many more jobs.
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, and infrastructure. It also intends to announce more strategic initiatives in the coming months.