Saturday, 22 June 2013

The Abraaj group snaps up Fan Milk International.....

Title: Abraaj: a fan of milk

A lot has been written about the potential of the African consumer but there’s not been exactly a flood of deals to demonstrate investor interest.

Well, here’s one: the Abraaj group, one of Africa’s larger private equity groups, has snapped up Fan Milk International of Ghana. It’s a vote of confidence for the west African country, which has seen consistently high growth over the last few years, and for the region in general.

Abraaj has bought up 100 per cent of the dairy producer and distributor for an undisclosed sum but Mergermarket (owned by the FT group) reported: “a source confirmed that the deal for the entire company is worth more than the shares on the GSE”. Fan Milk International had a market capitalisation 676.63m cedi ($335m) on the Ghanaian Stock Exchange – so a price of around $350m is not out of the question.

That would make it the largest ever private equity deal in FMCG (fast-moving consumer goods) in Sub-Saharan Africa, outside South Africa, according to Abraaj.

According to Mergermarket, “a Ghanaian banker familiar with the deal said other PE firms such as Actis may have also expressed interest in Fan Milk, but were outbid by the price Abraaj offered, the banker said, declining to elaborate.”

Fan Milk International is west Africa’s leading manufacturer and distributor of frozen dairy products and juices, and operates Ghana, Nigeria, Togo, Ivory Coast, Benin and Burkina Faso. It was established over 50 years ago and has built a regional manufacturing and distribution cold chain network, as well as a portfolio of convenience food and beverage brands that are sold through 31,000 outlets. The company sells over 1.8m items daily in the region.

With a potential reach of over 250m customers, Fan Milk’s appeal is clear, especially when combined with growth in the region.

Source: Bloomberg

Shares in Fan Milk Ghana, the African listed unit, jumped in late January to mid February, rising from around Ghs3.5 to Ghs5.2. Research from Databank back in February suggested the shares were overvalued, giving a target price of Ghs3.83. In its full year 2012 results, Fan Milk made Ghs36.4m on turnover of Ghs147m ($73m).

The Abraaj Group is one of the largest and most active private equity investors in Africa, having invested $2.2bn in 69 companies. Arif Naqvi, its founder and group chief executive, said in a statement: “Africa is witnessing the rise of a burgeoning middle and consumer class, so the acquisition of FMI is an extremely exciting and compelling investment opportunity. FMI’s portfolio of leading consumer food brands perfectly complements our African investment strategy.”

Although, as Preben Sunke, chairman of Fan Milk international’s board of directors noted: “Running a business in West Africa is no mean feat. Changing legislation, daily power cuts and economic uncertainty are all part of everyday life.”

An interesting word of warning for the new owners.

Credit/Source: FT at

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