Unga eyes bakery buyout after selling Elliots in the 90s

What you need to know:

Unga Group is in talks to acquire Nairobi-based Ennsvaley Bakery, which makes bread, cakes, doughnuts, cupcakes and cookies
The deal will diversify Unga’s earnings from milling of maize and wheat flour products like Jogoo, Hostess and Exe Chapati as well as making animal feeds
The miller disclosed the deal in a notice to shareholders on Friday ahead of the AGM scheduled for November 28

Unga Group is set to re-enter the baking business more than 15 years after the miller sold its interest in Elliots Bakeries.

The Nairobi Securities Exchange-listed firm said it is in talks to acquire Nairobi-based Ennsvaley Bakery, which makes bread, cakes, doughnuts, cupcakes and cookies.

The deal, whose details remain sketchy, will diversify Unga’s earnings from milling of maize and wheat flour products like Jogoo, Hostess and Exe Chapati as well as making animal feeds.

The miller disclosed the deal — which will give it a presence in finished cereal products — in a notice to shareholders on Friday ahead of the AGM scheduled for November 28.

Unga informed shareholders that it has removed the buyout of Ennsvaley Bakery from the agenda because negotiations on the deal are yet to be concluded.

“Subject to satisfactory conclusion of the negotiations, full disclosure of the proposed transaction will be made in due course,” Unga said in the statement.

The planned buyout underlines Unga’s appetite for acquisitions; reversing a string of divestiture it made from the 1990s including the sale of its edible oil unit and Elianto brand in 1998 to Bidco Oil Refineries Ltd, the Elliots deal ad sale of residential properties.

The miller was then in losses—which capped with a Sh708 million loss in 1998—and was looking to raise cash as it struggled to fit in a newly liberalized market.

Unga has been buoyant since 2000 when it paid a dividend for the first time in 12 years and is souring the market for acquisitions.

The company this year assumed full control of Unga Millers (Uganda) after buying out a 40 per cent stake held minority shareholders for an undisclosed amount.

Its ongoing acquisition drive in the region is aimed at growing its earnings and diversifying geographically and in terms of product categories.

The firm generates 61 per cent of its sales from maize and wheat products while animal feeds account for 37 per cent of turnover, with the rest coming from a packaging business. Kenya accounts for 93 per cent of its sales.

In the baking business, it will face competition from firms like mini bakeries, retail chains like Tuskys and Uchumi as well as Broadways.

Unga reported 45 per cent jump in net profit to Sh508 million in the year to June, though its sales dropped marginally to Sh15.7 billion from Sh15.9 billion a year earlier.