Just learnt Tiger Brand, a South African Based company is in discussion with Dangote Group to acquire its much maligned food business, Dangote Flour. The deal is reported to be worth about $125m and involves taking over his 80% stake.
I wrote in a blog some weeks back why it made all the sense for Dangote to exit the food business as it has largely remained unprofitable. However, Tiger Brand is adopting a different approach which may see them turn the fortunes of the faltering food industry. Recently, they acquired Deli Foods makers of digestive busicuits, cream crackers etc. They were also reported to have acquired a 49% stake in UAC Foods the owners of Mr Biggs and by far the most successful food chain in Nigeria.
By making these strategic acquisitions Tiger Brands is effectively consolidating competition which has been the Achilles heel to an industry rife with multiple players. Dangote Flour Mills arms then with the manufacturing side of the food business, whilst their investments in UAC and Deli ensures that the trade side is also within their control.
Is it good for Nigeria? Its half full or half empty in my opinion. Competition makes prices go down. However, massive price drops kill businesses which lead to job losses. With their acquisitions, I expect these companies to be better focused and well positioned to take advantage of the ubiquitous Nigerian market.
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