Thika miller now buys out rival in Sh200 million deal

KENYA – The manufacturer of the Soko maize flour has bought out a rival miller for more than Sh200 million as it seeks to expand its market share in the competitive packaged food business.

KENYA – The manufacturer of the Soko maize flour has bought out a rival miller for more than Sh200 million as it seeks to expand its market share in the competitive packaged food business.

Thika-based Capwell Industries, which also produces Pearl and Ranee rice brands, has bought the maize milling assets of neighbouring Chania Flour Mills, which produces Chania Star and Chania Citizen brands.

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Capwell previously had one milling plant and the acquisition will enhance its output capacity in an industry where players are increasingly expanding their market reach.

“The investment is slightly over Sh200 million once all the other expenses and additional investment to get the plant into running condition are taken into account,” Chetan Shah, a director at Capwell Industries, told the Business Daily.

“We shall be maintaining some of their brands and also expanding our brands.”

The deal underlines increased interest in the local packaged food business, especially in the maize and wheat milling segment.

Alpha Grain Millers, the owners of Kifaru maize and wheat flour brands, last month opened a $10.5 million (Sh940 million) plant in Athi River to expand output.

The factory can produce 300 tonnes of maize flour and 150 tonnes of wheat flour daily.

South Africa’s Tiger Brands earlier this year moved to acquire Kenya’s Rafiki Mills and Magic Oven Bakeries in a deal estimated at Sh2.1 billion.

Tiger Brands, however, pulled out of the proposed transaction after apparently failing to agree on a mutually agreeable closing price with the firms’ owners.

Magic Oven deals in cakes and buns while Rafiki produces wheat and maize flour at its Nairobi plant.
It remains to be seen whether Tiger Brands will seek new buyout targets or start operations from scratch in the local food business.

Nairobi Securities Exchange-listed Unga Group has announced plans to acquire Nairobi-based Ennsvalley Bakery to re-enter the finished cereal goods market, which it exited more than 15 years back with the sale of Elliots Bakeries.

The share swap deal is estimated at Sh446 million.

Chania spun off its maize milling business including premises, plant and machinery to Capwell, only retaining the animal feeds division.

Chania is owned by Thika businessman James Kirika Njoroge.

Capwell is a family-run food manufacturing business whose products includes flours (maize, porridge and wheat), rice and pulses.

A drop in sales has seen Chania’s maize meal and animal feeds factories operate below capacity, prompting the partial divestiture.

Ndung’u Njoroge, the lawyer representing Chania, says his firm is preparing to notify the Competition Authority of Kenya (CAK) of the transaction as required by law.

Increased activities in the formal food sector are set to stiffen competition, with rivals betting on growing urbanisation and consumer spending to boost demand.

“The packaged food sales recorded double digits value growth in 2013, thanks to the rapid westernisation and changing consumer lifestyles,” research firm Euromonitor said in a statement.

“Kenyans are increasingly demanding packaged food and moving away from traditional unpackaged food products.”

Mombasa Millers, Pembe Millers and Premier Group are ranked as Kenya’s top three millers in that order, based on corporate tax profiles by the Kenya Revenue Authority.

Rafiki is ranked fourth ahead of Unga Group.

November 5, 2014; http://www.businessdailyafrica.com/Corporate-News/Soko-maize-flour-miller-now-buys-out-rival-in-Sh200-million-deal/-/539550/2511100/-/32pett/-/index.html

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