Tiger Brands plans to buy stake in Dangote Flour

May 4 (Bloomberg) — Dangote Flour Mills Plc rose to the highest in more than a month on speculation South Africa’s Tiger Brands Ltd. plans to buy stake in the Nigerian producer. The stock jumped 4.9 percent to 4.74 naira by the close in Lagos, matching yesterday’s percentage gain and the strongest close since March 28. Tiger Brands gained 0.7 percent to 289.63 rand as of 4:53 p.m. in Johannesburg, paring an earlier rise of as much as 2 percent and giving the company a market value of 55.2 billion rand ($7.1 billion).

“There are rumors that Tiger Brands are the potential acquirers,” Esili Eigbe, Lagos-based analyst at Stanbic IBTC Bank Plc, said by phone today. “If it goes ahead to make the acquisition, it will be a substantial addition to its portfolio of products, especially in grains.” Tiger Brands promoted Thabi Segoale, managing executive of its grain division, to head its Nigerian business, Bongiwe Njobe, group executive for corporate sustainability, said. “We have actively been pursuing a whole lot of interests in Nigeria,” Njobe said without confirming whether the company made an offer to buy Dangote Flour. “We will make an announcement when appropriate.”

Dangote Flour expects a 78 percent rise in profit in the fourth quarter of its 2011 fiscal year, it said Jan. 5. Net income will be 4.84 billion naira (30.1 million) for the three months through December, up from 2.72 billion naira a year earlier, the Lagos-based company said in a statement. The company’s 2011 full-year results has been due for release since March

Acquisition Spend

“Dangote plans to sell 80 percent of its food business to foreign investors,” Adedoyin Adelakun, a Lagos-based analyst at Vetiva Capital Management, said by phone today, without naming the potential investors. Dangote Flour has declined 5 percent this year, compared with a 10 percent rise in the Nigerian Stock Exchange All-Share Index over the same period. It was trading at 51 naira in March 2008 and 25.8 naira in April 2010. The South African company may spend twice as much on acquisitions this fiscal year because its balance sheet has room for more debt, the company said Nov. 23. “Our balance sheet can easily take another 4 billion rand” in fiscal 2012, Chief Executive Officer Peter Matlare said in an interview at the company’s Johannesburg headquarters. Dangote Flour has a market value of $151 million, based on today’s share price.

Wheat Import

Tiger Brands spent 2.1 billion rand buying stakes in companies outside South Africa in the 12 months through September, including the purchase of UAC Foods Plc. in Nigeria, it said its annual earnings statement. In April 2011, Tiger Brands acquired all the shares in biscuit maker Deli Foods Nigeria Ltd. The U.S Department of Agriculture forecasts Nigeria, Africa’s most populous nation, will import 4.1 million tons of wheat in the year ending June 30. Most of Nigeria’s wheat comes from the U.S., according to the government’s international trade data. Calls made to Antony Chiejina, a spokesman for Dangote Flour, were not answered.