Friday, August 17, 2012

Tiger Brands targeting more Kenyan acquisitions

By Geoffrey Irungu
South African food and consumer healthcare group Tiger Brands is targeting more acquisitions in Kenya as part of a strategy to grow the share of revenues, which it generates outside its home country.
The company already owns 51 percent of Kenya’s Haco Industries.
According to a report by UBS Investment Research, the conglomerate is willing to spend Sh54 billion (5.4 billion rand) on acquisitions to achieve a target of growing revenues generated from outside South Africa to 30 percent.
Renier Swanepoel, the analyst who wrote the report said that the firm is definitely targeting expanding in Kenya with whatever opportunities they can get in specific industries they have strength.
Tiger Brands East Africa managing director Polycarp Igathe, who oversees the company’s operations in eastern Africa, confirmed that the firm plans to grow its presence in Kenya through acquisitions or start-ups.
Mr Igathe said that the discoveries of coal, oil, and gas in East Africa had increased the attractiveness of the region to investors. He declined to talk about any specific targets, but said Kenya had become a “serious player in the Tiger Brands business.”
Early last month, the firm announced that it had struck a deal to buy 63.4 percent of Nigeria-based Dangote Flour Mills as part of a bigger plan for expansion of its footprint in the Africa region.
The deal is awaiting approval from regulators. In the report, dated June 22, UBS Investment Research says Tiger Brands is targeting to raise its revenues by at least Sh54 billion from outside South Africa.
Dangote Flour Mills acquisition is expected to bring Sh25 billion of the targeted revenue, indicating that another Sh30 billion worth of revenue would be sought from further expansion.
Excluding exports from South Africa to other African countries, this would amount to 20 per cent more revenues.
Both exports and on-the-ground operations (acquisitions and Greenfield) should then generate 30 percent of the revenues outside South Africa in the next 5 to 10 years.
“It’s clear that, based on its own historical transactions, TBS would be willing to spend R5.4 billion (Sh54 billion) in order to achieve its stated objective of achieving Africa on-the-ground revenue of 20 per cent,” says the UBS report.
Mr Igathe was recently appointed to the position of regional managing director for Tiger Brands in East Africa, and was replaced by Geoffrey Kiarie as the new MD for Haco Tiger Brands.
The drive for more business outside of South Africa appears to be driven by low growth opportunities in an economy with lower growth in recent years relative to its other African peers.

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