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Why Dangote offloaded noodle plants to rival for N3.75bn

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A clear reason has been adduced by the core investor in Dangote group, Aliko Dangote on why his group sold a unit of Dangote Flour Mills, Dangote Noodles Limited, to rival pasta maker, De United Foods Industries, for N3.75bn ($12.26m). Two production lines of the company were involved in the deal.

Currently, Nigeria’s noodle market is fiercely competitive and De United, with a market share of around 70 per cent, is seeking to consolidate the sector.

Already, De United said it had signed an agreement with Dangote Noodles to buy plants at its Ikorodu and Calabar factories. It will also buy stock worth N383.94m, according to a report by Reuters.

The deal comes after Dangote sold a small stake in its cement business to foreign investors in a one-off stock market deal valued at N27bn.

Privately-held Dangote Industries Limited, with interests in agriculture, real estate and truck assembly, bought back the flour unit it had sold to South Africa’s Tiger Brand for $1 in 2015 after it posted losses.

Within the period, shares in Dangote Flour Mills have more than doubled so far this year after rising by 276 per cent last year. The stock price was down by 3.17 per cent on Tuesday at N9.20 naira.

Business Hilights gathered that Dufil Prima Foods, the parent of De United Foods, is a privately held company set up over two decades ago, which has grown to become the largest pasta maker in West Africa.

Earlier in July Dufil Prima Foods said it would raise N40bn in the local debt market to broaden its funding base.

In a statement, De United said the transaction had been approved by both companies and the regulators.

However, part of the deal is that De United would continue to produce noodles under the Dangote brand for two years after the acquisition.

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