Singaporean agribusiness Olam International today announced the sale of its dairy processing plant in Abidjan, which manufactures sweet condensed and evaporated milk for the local market, to FrieslandCampina for US$18.7m (€14.2m).
FrieslandCampina agreed to pay an additional US$6.3m (€4.8m) to use Olam's 'Pearl' dairy brand to market sweet condensed and evaporated milk products in designated African countries.
The deal, which is expected to close in the next few months, will "further strengthen" FrieslandCampina's position in West Africa, said CEO Cees ‘t Hart in a statement.
Alongside manufacturing capabilities in nearby Nigeria, FrieslandCampina already markets its Bonnet Rouge brand evaporated milk in the Ivory Coast.
“We already sell Bonnet Rouge, a premium brand, there," Jan-Willem ter Avest, director of media relations, FrieslandCampina, told DairyReporter.com. "We are broadening our interest in the market with this acquisition."
“It’s also an opportunity to export milk powder from the Netherlands to the Ivory Coast," he said.
FrieslandCampina identified West Africa as an area of interest in its 2010 ten-year strategy, route 2020, through which it aimed to achieve growth by expanding its dairy product offering and increasing its geographical presence.
“We were looking at the region and identified a number of potential areas to invest,” he said.
Its decision to acquire Olam's dairy business was made easier by the fact it wanted to sell, ter Avest continued.
“We’re always looking for opportunities in markets we want to grow in. This was an opportunity that came along.”
FrieslandCampina is now looking forward to benefiting from "strong growth" in the Ivory Coast, which, according to the World Bank, recorded GDP growth of 8.7% in 2013.
Olam expects to record total cash inflow of US$25m and a one-time pre-tax gain of approximately US$10m (€7.6m) from the transaction. The disposal will also enable it to focus its energy on other segments of its dairy business, it said in a statement.
FrieslandCampina's deal with Olam makes it the latest in a growing line of Western dairy processors to invest in West Africa.
In September 2013, Arla Foods entered into a sales partnership with Ivorian firm, Mata Holdings, to distribute Denmark-made Dano brand milk powder in the country.
The following month, Danone teamed up with private equity firm the Abraaj Group to jointly acquire Fan Milk International, which operates in Nigeria, Ghana, the Ivory Coast, Liberia, Burkina Faso, Benin, and Togo.