Kellogg announced it was joining hands with Tolaram Africa, the Nigeria-based unit of Singapore’s Tolaram group, taking a 50 percent share in its distribution arm Multipro, to open markets for its cereals, snacks and other foods.
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The company also created a joint venture with Tolaram to develop snacks and breakfast foods to sell in West Africa.
With the $450 million stake in Multipro, Kellogg also gained the right to buy a share of Tolaram Africa Foods, which controls the marketing and manufacturing of Indomie and other brands.
Kellogg said it would fund this acquisition by using global cash and increase commercial paper in the amount of $350 million.
The expansion into Africa could work out well for Kellogg.
John Bryant the CEO at Kellogg said to investors that the African region was experiencing explosive growth, as there are nearly 1 billion people and an economy, which is expected to double over the upcoming decade.
Bryant said that Tolaram had a very good track record for building successful consumer brands, including Indomie noodles the market leader and at fueling growth. “This partnership is an excellent strategic fit for Kellogg”.
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The world’s largest cereal maker will also get access to Multipro’s distribution network in Nigeria and Ghana, and potentially in the Dominican Republic of Congo, Ivory Coast, Cameroon and Ethiopia. The final purchase price is dependent on actual results for EBITDA in 2015. Excluding transaction costs, reported EPS will not be affected in 2015 and 2016. However, the company expects that costs associated with the transaction will lower reported earnings in the third quarter of 2015 by about 1 cent per share.
