Olam International Ltd., the commodity trader controlled by Singapore’s state investment company, is expanding its food operations in Africa with the purchase of wheat mills and pasta-making plants from one of Nigeria’s biggest millers.
Olam will buy the assets from BUA Group for an enterprise value of $275 million, the company said Monday in a statement. The assets include two wheat mills and a pasta manufacturing facility in Lagos, a non-operating mill in the north of Nigeria, and a wheat mill and pasta-making plant under construction in Port Harcourt in SouthSouth Nigeria.
The purchase will double Olam’s milling capacity in sub- Saharan Africa to 7,640 metric tons a day from 3,880, and once the plants in Port Harcourt are competed will cement Olam’s position as the No.2 miller in Nigeria, the company said.
“It’s basically a matter of expanding their product offerings,” Carey Wong, OCBC Investment Research analyst, said from Singapore. “We don’t think they’re straying very far from food products, not like the last time when they did fertilizers which didn’t really pan out.”
Olam may make further outlays to build and strengthen its brand so that its pasta products can compete with other brands in the market, Wong said.
Olam rose as much as 1.5 percent in Singapore trading on Monday and was 0.9 percent higher at S$1.71 a share by 11:46 a.m. local time.