Don't Miss


Home   >   Business   >   Tiger Brands May Acquire Monopoly in Nigeria’s Food Industry

Tiger Brands May Acquire Monopoly in Nigeria’s Food Industry

By on December 17, 2012

Stakeholders in Nigeria’s food industry have cautioned that the recent purchase of majority stakes in UAC Foods and Dangote Flour Mills by South African- owned Tiger Brands could create an unhealthy monopoly.

They also called on the Securities and Exchange Commission (SEC) to watch Tiger Brands closely for capital flight and anti-trust activities resulting from aggressive take-over bids by the company.

Tiger Brands spent $190m acquiring 63.35% of Dangote Flour Mills, one of the largest makers of pasta and flour in the country. The deal sees Dangote Group retain 10% of the company with its president, Aliko Dangote as chairman.

They had also acquired biscuits maker, Dell Foods, and a 49% stake in UAC Foods.

The Managing Director, Investment Banking, BGL Securities Limited, Mr Wale Oluwo, said that rather than Tiger Brands setting up their companies from scratch, it had a preference for acquiring well-established and boomin companies which was worrying.

He also said that the SEC  not playing its role as anti-trust transactions monitor was disturbing.

“The acquisition and any inflow of investment into the nation is a positive development for the country, the companies and the industry involved. But I would have preferred Tiger Brands start its own companies from the scratch like the telecom companies did, or acquire and revive ailing companies in the food sector.

“Their preference for nitpicking our best is something that the SEC should look into as they are gradually becoming a monopoly.”

An analyst, Mr Tola Odukoya of Dunn Lorren Merrifield, concurred with Oluwo’s opinion, and added that due to the backward integration strategy of Tiger Brands by purchasing Dangote Flour Mills to achieve greater cost efficiency for UAC Foods’ largely flour-based operations, domestic flour milling would not feel any impact from the acquisition.

Another analyst, Mr David Adonri of Lamberth Trust & Investment differed with his two colleagues, as he believed that Tiger Brands would bring its competence to bear on the industry by the acquisitions, and this will positively impact on the industry.

The company had recently its acquisitions in Nigeria, saying “Nigeria is a key strategic growth market in West Africa, the second largest African economy and one of the fastest growing in sub-Saharan Africa with a population of 160million and an annual GDP growth rate of 7% projected for the next 3 years.”

It believed that the acquisitions would add scale to its existing Nigerian businesses and allow it to leverage on the opportunities in the market.

Also speaking in an interview recently, the Head, Business Development, Thushen Govender, said that the company performs analysis of the socio-economic environment prior to investments, looking at factors such as GDP, GDP per capita, population among other things.

“Based on these, Nigeria, Egypt and Ethiopia feature highly due to their population which is important for a consumer-driven organization. If one were to go on growth alone, it would be Angola, Ethiopia and Nigeria.”

Tiger Brands has expanded its continental footprint across Africa over recent years. In addition to Nigeria, it currently has operations in Cameroun, Kenya, Ethiopia and Zimbabwe.