Olam acquires Nigerian dairy and beverage firm Kayass

Olam International, a Singapore-based processor of agricultural products and ingredients for food products, has acquired a 100% stake in Nigerian dairy and beverage firm Kayass for $66.5m.

The deal, which marks Olam’s entry into the dairy and beverage segments in Nigeria, is a part of its strategy to strengthen its packaged foods businesses in West Africa.

According to the company, the purchase of an existing business with modern manufacturing capabilities would speed up its entry into the dairy and beverage segments, allowing it to take advantage of Nigeria’s fast growing consumer market.

Kayass produces packaged milk powder, flavoured milk, juices and UHT milk at two factories in Lagos, one a dairy and beverage manufacturing plant and the other a milk powder packaging facility.

The company’s beverage brands include Nature’s Fresh and Yo-Jus, and its market-leading milk powder brand Blue Boat.

Olam packaged foods senior vice president and head M Ramanarayanan said the acquisition enables the company’s packaged foods business to enter and scale up in Nigeria.

"We believe that Olam, combined with the assets and capabilities of Kayass, will be competitive in offering differentiated products based on our best practices in manufacturing, global sourcing, product development and innovation, branding and marketing," Ramanarayanan added.

Olam plans to fund the investment through internal accruals and borrowings, and expects it to be earnings accretive from fiscal 2014.

The company forecasts the investment to generate 20% of EBITDA margin by fiscal 2016, and deliver equity internal rate of return of 35%.

Olam, which started its operations in Africa in 1989, has presence in West African markets in Nigeria, Ghana, the Ivory Coast, Mali, Burkina Faso, Togo and Niger, where it produces tomato paste, pasta, seasonings, noodles and biscuits.