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Investors cheer Nampak's R3bn Nigeria deal

18 November 2013, 17:10Adiel Ismail

Cape Town - Nampak [JSE:NPK] said on Monday it bought Nigerian can maker Alucan Packaging in a deal worth approximately R3bn.

The acquisition in Africa's second largest economy is part of the group’s stated strategy to grow its revenue footprint in Africa to 35% by 2015.

Investors welcomed the news of the acquisition, sending the share price up 3.35% to R31.78 to outperform its sector peers and making it one of the top performers on the JSE.

Nampak already operates in 12 countries generating R2.5bn in annual revenue and almost 30% of the firm's trading profit.

The packaging firm has been operating in Nigeria for the last 11 years and the acquisition will significantly increase its presence in Nigeria, said CEO Andrew Marshall.

The decision to pay a substantial premium to net asset value for Alucan Investments Limited (AIL) and Alucan Packaging Limited (APL) is to access the Nigerian market immediately and to gain first mover advantage in the country, he said.

The deal also allows Nampak to acquire a leading rigid plastics company and will be funded through existing cash resources and debt facilities.

"The acquisition is likely to quickly position the Nigerian entity as a market leader," CEO of Africa At Work, an African business consultancy, Dianna Games told Fin24

The Nigerian market is seeing strong growth in consumer goods, particularly in food and drinks and this is also driving growth in the packaging sector, she said.

There are over 100 packaging companies in Nigeria, said Games, but many are small and lack access to funding to upgrade their operations.

There is a lot of room still for world-class companies like Nampak in Nigeria, she said.

Games said security in Nigeria is an issue of concern to investors because of the rebel group Boko Haram.

"Although most of the attacks are in the far north-east of the country, consumer goods companies have had disruptions in their supply chains as distributors find it difficult to operate in the affected areas."

She said, however, that most of the big corporates are based in the south where there are instances of crime but no more than in most other countries.

Nampak investor relations and property manager Graham Hayward soothed security fears saying Nampak have been operating in Nigeria for approximately 11 years and have thus far not experienced any security problems other than the normal safeguards that one would take.

The Alucan facility, located close to Lagos, is already up and running and can produce up to one billion cans per annum.

It has a reliable source of gas, which will be used for heating and power generation, and can accommodate a second line with the potential of more jobs being created.

The transaction is subject to the fulfilment of certain conditions, including the approval of the South African Reserve Bank.


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