Markets & Finance

Tiger Brands eyes Kenyan acquisition

igathe

Haco Tiger Brands managing director Polycarp Igathe at a past function. He said the discoveries of coal, oil, and gas in east Africa had increased the attractiveness of the region to investors. Photo/File

South African food and consumer healthcare group Tiger Brands is eyeing more acquisitions in Kenya as part of a strategy to grow the share of revenues that it generates outside its home country.

The company already owns 51 per cent of Haco Industries, a Kenyan firm.

It is willing to spend Sh54 billion (5.4 billion rand) on acquisitions to achieve a target of growing revenues generated from outside South Africa to 30 per cent, a report by UBS Investment Research has indicated.

“Tiger Brands is definitely targeting to expand in Kenya. They want to get whatever opportunities they can get in specific industries where they have strength,” Renier Swanepoel, the analyst who wrote the UBS report, said in a phone interview from South Africa.

Tiger Brands East Africa managing director Polycarp Igathe, who is charged with overseeing the company’s operations in eastern Africa, confirmed that the firm plans to grow its presence in Kenya through acquisitions or start ups.

Mr Igathe said that the discoveries of coal, oil, and gas in east Africa had increased the attractiveness of the region to investors. He declined to talk about any specific targets, but said Kenya had become a “serious player in the Tiger Brands business.”

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The firm announced early last month that it had struck a deal to buy 63.4 per cent of Nigeria-based Dangote Flour Mills as part of a bigger plan for expansion of its footprint in the Africa region.

The deal is awaiting approval from regulators. In the report, dated June 22, UBS Investment Research says Tiger Brands is targeting to raise its revenues by at least Sh54 billion from outside South Africa.

Dangote Flour Mills acquisition is expected to bring Sh25 billion of the targeted revenue, indicating that another Sh30 billion worth of revenue would be sought from further expansion.

Excluding exports from South Africa to other African countries, this would amount to 20 per cent more revenues.

Both exports and on-the-ground operations (acquisitions and greenfield) should then generate 30 per cent of the revenues outside South Africa in the next five to 10 years.

“It’s clear that, based on its own historical transactions, TBS would be willing to spend R5.4 billion (Sh54 billion) in order to achieve its stated objective of achieving Africa on-the-ground revenue of 20 per cent,” says the UBS report.

Mr Igathe was recently appointed to the position of regional managing director for Tiger Brands in East Africa, and was replaced by Geoffrey Kiarie as the new MD for Haco Tiger Brands.

The drive for more business outside of South Africa appears to be driven by low growth opportunities in an economy with lower growth in recent years relative to its other African peers.

“With the underlying domestic South African consumer market battling to grow over the last three years, TBS (Tiger Brands) has increased its efforts to establish a bigger African presence,” says the UBS report.

The South African economy is estimated to have grown by 3.2 per cent in 2011 and is projected to record up to 2.8 per cent growth this year.

GDP Growth in sub-Saharan African, excluding South Africa, was 5.9 per cent last year and is expected to maintain the trend this year.

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