Kellogg invests in snacks, breakfast food in Africa

by Jeff Gelski
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The Kellogg Co. has formed a joint venture with Tolaram Africa Foods.
Tolaram Africa Foods owns 49 percent of Dufil Prima, which manufactures such food brands as Indomie noodles as well as Minimie snacks, Power oil and Power pasta.

BATTLE CREEK, Mich. – The Kellogg Co. will increase its presence in Africa through a partnership with Tolaram Africa, Kellogg announced Sept. 15. The two companies will create a joint venture to develop snacks and breakfast foods for the West African market.

The deal includes Battle Creek-based Kellogg acquiring 50 percent of Multipro, a sales and distribution company in Nigeria and Ghana, and Kellogg having the right to acquire a stake in Tolaram Africa Foods in the future. Tolaram Africa Foods owns 49 percent of Dufil Prima, which manufactures such food brands as Indomie noodles, which often are eaten at breakfast, as well as Minimie snacks, Power oil and Power pasta.

Kellogg has agreed to pay about $450 million for the stake in Multipro and the option to buy the stake in Tolaram Africa Foods. Total sales from Kellogg’s moves are expected to be about $750 million in 2015. The Kellogg Co. will fund the acquisition using international cash and an increase in commercial paper of $350 million. 

John Bryant, chairman and CEO of Kellogg
John Bryant, chairman and CEO of Kellogg

“As a region that is experiencing explosive growth, with a population of almost 1 billion people and an economy that is expected to more than double over the next 10 years, Sub-Saharan Africa provides tremendous opportunity for our company,” said John Bryant, chairman and CEO of Kellogg. “Tolaram Africa has built a highly successful consumer products business, and today, it is one of the largest food companies in Nigeria. Tolaram has a great track record of building beloved consumer brands, including the market leader Indomie noodles, and fueling their growth. This partnership is an excellent strategic fit for Kellogg.”

Multipro, based in Lagos, Nigeria, provides Kellogg access to about 1,000 distributors, and Multipro operates 19 warehouses across 6 locations. Multipro is establishing similar networks in other African countries, including the Democratic Republic of Congo, the Ivory Coast, Cameroon and Ethiopia.

“Kellogg is a world leader in its categories and has successfully built brands that are synonymous with it,” said Sajen Aswani, CEO of the Tolaram Group. “We’re pleased to have entered into this partnership, as we share similar values and an aligned vision for Africa, a continent we have been operating in for over 35 years. This is another significant step towards providing affordable and wholesome nutrition for our expanding consumer base.”

The Tolaram Group, based in Singapore, has business interests in Asia, Africa and Europe. Its portfolio consists of consumer goods, infrastructure, energy, digital services and other services such as distribution, financial services, paper products, real estate and textiles.

The Kellogg Co. said the estimated purchase price represents a multiple of the average of 2014’s actual EBITDA and 2015’s expected EBITDA of about 15 times. It represents a multiple of about 13 times 2015’s expected EBITDA. The final purchase price is dependent on actual results for EBITDA in 2015.

The Kellogg Co. expects the transaction will not affect reported earnings per share, excluding transaction and integration costs, in 2015 or 2016. Kellogg expects slight earnings accretion in 2017. Costs associated with the transaction will lower reported earnings by about 1c per share in the third quarter of 2015. The impact will be excluded for comparable earnings per share.

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