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 January 11, 2016 - 8:16 PM EST
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Olam Targets U.S.$1 Billion Share of Nigeria's Flour Milling Market

With the acquisition of BUA Group's milling business in

Nigeria
, Olam International Limited has expressed optimism of doubling its total wheat milling capacity in sub-Saharan Africa to approximately 7,640 tonnes per day or 2.78 million tonnes yearly.

According to the firm, achieving the target will help the firm control a sizeable share of the Nigerian flour market which is presently in excess of $2 billion and is expected to hit five million tonnes by 2020.

Under the BUA deal, Olam acquired Amber Foods Limited, which through its 100 per cent owned subsidiary Quintessential Foods Nigeria Limited owns the wheat milling and pasta manufacturing assets of the BUA Group in

Nigeria
for a total enterprise value of $275 million.

A statement from the firm explained that the BUA Group, a diversified foods and infrastructure business group in

Nigeria
, is among the top five wheat millers in the country with wheat milling and pasta manufacturing capacities of 3,760 and 700 metric tonnes per day (TPD) respectively.

"The assets to be acquired include two wheat mills and a pasta manufacturing facility in

Lagos
, a non-operating mill in
Kano
in the North of
Nigeria
, and a wheat mill and a pasta manufacturing plant under construction in Port Harcourt in the Southeast of
Nigeria
.

The acquisition will strengthen Olam's position as the number two wheat miller by sales volume and make it a leading pasta player in

Nigeria
. Olam's total wheat milling capacity in the country will increase from its current 2,380 TPD to 6,140 TPD once the facilities in Port Harcourt are completed in June 2016. Olam's total wheat milling capacity in Sub-Saharan Africa will double to reach approximately 7,640 TPD", the statement read in part.

n his part, Managing Director and Chief Executive Officer of Olam Grains, K C Suresh: "

Nigeria
is a high growth milling market with volumes expected to reach five million metric tonnes in 2020 as population growth and urbanisation increase the demand for wheat-based products. The size of the Nigerian flour market is in excess of US$2.0 billion, growing at 3.5 per cent yearly while the pasta market is growing at the rate of eight per cent yearly.

We are very pleased to acquire these strategically located, port-based assets as undeveloped land at Nigerian ports is increasingly difficult to access. They are highly complementary to our existing asset base in

Lagos
and Warri, and will not only strengthen our current market position and deliver multiple synergies but also enable us to access the high growth areas in the North and Southeast of
Nigeria
."

Founder, BUA Group, Abdulsamad Rabiu said: "This signing marks a major milestone in our medium term strategy. Over the years, we have run one of the largest and most efficient flour milling businesses in

Nigeria
and are confident in the value it will add to the buyer's operations. Our Group's strategic focus will now be to diversify to business areas with greater potential for export where the sourcing and utilisation of foreign exchange is less and most of the materials needed for production can be sourced locally whilst also positioning our current line of Foods and Infrastructure businesses for market leadership."

Speaking on the Group's medium term growth strategy, Alhaji Rabiu who is also the Executive Chairman of BUA, said expanding the backward integration of its sugar plantations in Kwara and Kogi Sates is key.

"Extensive work is ongoing in Lafiagi, Kwara state with over 20,000hectares and we have another 50,000 hectares of farmland in Bassa, Kogi. These two operations form the fulcrum of our backward integration programme for Sugar and this will further reduce the country's dependence on imported raw sugar while supporting the value chain in sugar production within

Nigeria
."

"Similarly, we expect to replicate the successes we have recorded through the deep integration of our cement operations.

With most raw materials for cement currently being sourced locally, we have been able to scale up operations significantly with minimal dependence on foreign exchange and will soon start exporting to neighbouring countries from both our Obu and Sokoto plants which are currently undergoing 3.5million MTPA and 1.5million MTPA capacity expansions respectively to bring the Group's cement production capacity to around 10million MTPA by 2018," he added.

The BUA Group, a diversified foods and infrastructure business group in

Nigeria
, is among the top

Abdulsamad also believes that with global prices of crude oil coming down and demand for foreign exchange going up, these projects will help create badly needed jobs in

Nigeria
, diversify BUA's business further, and stimulate the Nigerian economy as well as support the government's roadmaps for agriculture and extractive industries.

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Source: Equities.com News (January 11, 2016 - 8:16 PM EST)

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