Honeywell Group Limited (HGL) and Flour Mills of Nigeria Plc (FMN) have signed an agreement to combine FMN and Honeywell Flour Mills Plc (HFMP), a portfolio company within Honeywell Group. Through this agreement, Honeywell Group will transfer a 71.69 percent stake in Honeywell Flour Mills to Flour Mills of Nigeria at a total enterprise value of N80 billion.
The agreement which is subject to regulatory approval and is expected to close in the coming months, creates a platform for two companies with over 85 years of combined history to come together and further advance their shared goal of making affordable food available to Nigerians.
Commenting on the transaction, Honeywell Group Limited’s Managing Director, Mr Obafemi Otudeko 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.”
Honeywell Group was founded in 1972 as a food trading company servicing West Africa and now invests in various vital sectors of Nigeria’s economy. Its portfolio covers food production, real estate, leisure and hospitality, energy, infrastructure, and financial services.
HGL has stated it will continue its journey of strategically refining and growing its investment portfolio, by consolidating in sectors it currently invests in, It also confirmed it will be announcing other strategic initiatives in due course in order to achieve the company’s vision of creating value that transcends generations.
Last year, Honeywell Flour Mills Plc recorded some of the best growth in its history, growing revenue by more than 36%, from N80.45 billion in 2019 to N109.59 billion in 2020. It also recorded a 73.1% increase in profit from N650.49 million in 2019 to N1.13 billion in 2020.
FMN itself has existed for as long as Nigeria has been an independent country. It was incorporated in September 1960 as a private limited liability company and became a public company in November 1978. Throughout its 61 years of operation, FMN has won the hearts of millions of Nigerians, particularly through its Golden Penny brand.
It remains one of Nigeria’s leading and oldest food and agro-allied company, and owns the largest single-site flour mill in the country. It also owns the largest edible oil and margarine factory and the largest sorghum milling facility in all Sub-Saharan Africa. In addition to these, it has made the most significant sugar production investment in Nigeria.
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“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,” Omoboyede Olusanya, CEO, Flour Mills of Nigeria, said.
Now, these two companies with a storied history, are joining forces to create a national champion that will boost Nigeria’s food manufacturing capacity, and ensure Nigeria is able to produce enough food to cater to its population of over 200 million people. The country’s current production capacity has been impacted by the inflation rate and rising food prices.
According to the National Bureau of Statistics’ Consumer Price Index report, Nigeria’s inflation rate sits at over 17 percent, which has led to the increase in the prices of staple food like bread, cereals, milk, etc. By combining their market offerings and production capacity, Flour Mills of Nigeria and Honeywell Flour Mills will help fight this by creating solutions that make life better for Nigerians.
Nigeria is also import-dependent, with manufactured and agricultural goods making nearly 75% of total imports. This spotlights the inadequacy of the agricultural value chain and emphasises the need for more significant investments.
According to the World Trade Organisation, Nigeria is the largest market for foodstuff in Africa, as it is the most populous country. In 2017 alone, Nigerians spent $44 billion on food. This indicates that there is massive room for growth in food manufacturing capacity. This is the need that informed the agreement between Flour Mills of Nigeria and Honeywell Group Limited.
This agreement is expected to help develop Nigeria’s industrial capability and the agricultural value chain through backward integration. This presents an opportunity for the new combined entity to continue contributing to the growth of the sector thus increasing national food production, which will ultimately help reduce local food prices and improve Nigeria’s export potential.
