Honeywell Flour Mills Plc, going by the ticker ‘HONYFLOUR,’ in today’s trading session, now trades at the session’s maximum point of ₦4.09, as the stock gained 9.95% so far, as of the time of writing this report. In the past two trading sessions, the stock has rallied over 20%, from ₦3.39 at the beginning of the week.
This rally in the price of Honeywell is a result of yesterday’s acquisition announcement. Flour Mills of Nigeria (FMN) and Honeywell Group Limited (HGL), on Monday 22nd November 2021, announced that they had signed an agreement to which Flour Mills of Nigeria will acquire Honeywell Group’s portfolio company, Honeywell Flour Mills Plc (HFMP).
This year, using today’s current market price, Honeywell has rallied over 240% so far, as it started the year at ₦1.20. Flour Mills of Nigeria, which goes by the ticker ‘FLOURMILL,’ although did not post any gains yesterday, is getting some bullish actions as it is currently up 5.98% as of the time of this writing.
What you should know
- According to Monday’s press release, Honeywell Group Limited has agreed to sell a 71.69% stake in Honeywell Flour Mills to Flourmills of Nigeria. It stated, “For the proposed combination of FMN through its affiliates and Honeywell Flour Mills Plc (“HFMP”), a portfolio company of HGL. At a total enterprise value of NGN80 billion, HGL will dispose of a 71.69% stake in HFMP to FMN.”
- Enterprise Value includes the debt of the company. Honeywell Flour Mills currently has a market value of N29 billion.
- The press release further stated that the final equity price per share payable will be determined based on HFMP’s adjusted net debt and net working capital at the date of completion.
- Honeywell currently has a debt balance of N78.5 billion and a cash balance of N27.3 billion as of the latest results. Flour Mills is also debt-laden with about N142.8 billion in debt and N52.6 billion in cash.
- It is unclear how Flour Mills paid for the acquisition. Our initial prognosis suggests this transaction is funded from debt. This puts the total debt profile of the two companies at 221.3 billion per their 2021 half-year results.
- Included in Honeywell’s loans is a N10.4 billion loan from First Bank, N2.3 billion from Bank of Industry, N6.2 billion from Fidelity Bank, and N3.5 billion from Polaris Bank. This is based on its last audited accounts for the period ended March 2021. Flour Mills on the other hand owes about N50 billion in several intervention loans to the Bank of Industry and the CBN. The company also has another N68.6 billion in commercial papers and bonds.
Conclusion
The press release also stated that the scale of the transaction provides employees of the consolidated company with more career development opportunities in a larger organization, with the potential to create more jobs in the economy as it will have more brands and categories, and a larger and more geographically diverse footprint.
