Olam offers to buy Dangote Flour Mills for N130bn

Singapore-based commodity trader Olam International has made a significant move by offering to acquire Dangote Flour Mills for 130 billion Naira. This announcement has sent shockwaves through the Flour Mill industry in Nigeria and raised concerns about potential monopolistic tendencies. Adedayo Ayeni, Vice President of Sub-Saharan Africa Consumer Analysis at Renaissance Capital, shared insights on CNBC Africa regarding the implications of this deal. The key theme surrounding this acquisition is the potential consolidation of market power and the impact on competition. Here are the key points discussed in the interview: Firstly, Olam's acquisition of Dangote Flour Mills would make them the largest Flour Millian in Nigeria, with a significant increase in production capacity. This move strategically positions Olam as a dominant player in the market, potentially controlling up to 43% of the market share in Nigeria. Secondly, industry analysts are concerned about the concentration of power in the hands of a few major players, with Olam and Dangote Flour Mills collectively controlling around 85-86% of the market. This could lead to pricing concerns and a potential squeeze on smaller competitors in the market. Lastly, the valuation of the deal is seen as favorable for Dangote Flour Mills, with Olam offering $26.20 per share, representing a premium for shareholders. The stock has already seen a significant increase in value following the announcement, indicating investor confidence in the deal. Ayeni also highlighted the potential for further acquisitions in the industry, suggesting that this may not be the last deal of its kind. The impact of this acquisition on the stock market is expected to be positive, with investors likely to see further upside potential. Overall, this deal marks a significant shift in the Flour Mill industry in Nigeria, with Olam positioning itself as a major player and raising questions about market competition and pricing dynamics.