FMN Plc Trades Lower 2-Month After Honeywell Acquisition Notice
Flour Mills of Nigeria (FMN) Plc has seen its share price falling behind as equity investors now value the company at N117.27 billion. The company share price ended today at N28.60 in the local bourse, the peak level it has seen in the last seven trading sessions, according to market data.
When the company announced the acquisition of rival Honeywell Flour Mills on November 22, 2021, its share price was N29.30 while rival share price jumps as investors started early positioning. Read: Honeywell Share Price Rises 20% after Acquisition Notice
It was understandable why equity investors’ moods swing into bargain hunting on such critical occasions. However, price action appears to have been stalled as the market awaits further information from the company.
Since the equity market traded cold late last year as Santa Claus escaped the local bourse, pasta maker Flour Mills of Nigeria share ended the financial year 2021 lower at N28.35.
Fast forward into 2022, stock buyers perception of FMN shares remain relatively stable but some analysts rather see buying opportunity in Honeywell instead due to the expectation of synergy risk.
MarketForces Africa reported that on November 22, 2021, FMN Plc announced a plan to acquire a 71.69% stake in Honeywell Flour Mills at an enterprise value of N80 billion naira.
A further 5.06% stake in Honeywell Flour Mills will be bought from FBN Holdings, Flour Mills of Nigeria said in a separate statement. Detail of the deal hinted that Honeywell will retain its listing on the Nigerian stock exchange. FMN Plc revealed the acquisition of Honeywell will be paid in cash and some debt.
It was a deal well thought through but market perception over the share price has reduced the company’s valuation – hurdles rises and more to cross. Honeywell Flour Mills was not a bad asset for the acquisition deal, but other stakeholders jumped at FMN notice to the investing public and regulators there were pending legal cases.
Speaking to the deal at analysts call, Boye Olusanya, the company Chief Executive said FMN will search for opportunities in West African countries, adding that the deal was necessary to defend its market share.
In the 9-month result in 2021, FMN revenue hits N555.34 billion, a steep increase of about 30% when compared with N423.48 billion reported in the comparable period.
Recording more than 92% annual profitability growth, the company went home with N23.61 billion after-tax profit. In the second half of 2020, the company had issued a bond, as part of a N70 billion programme to refinance existing debt.
The management said at the time the move was aimed at taking advantage of low money market rates, adding that Flour Mills had taken proactive measures to conserve cash in response to the coronavirus pandemic. The company sold N30 billion in commercial paper in April, it said, part of measures to cushion the possible impact of the coronavirus on its business.
“We have a 70 billion bond programme. We are looking to tap into the market again given the low-interest-rate environment. We anticipate coming to the market to refinance some of our existing debt by bringing a bond to the market. We anticipate doing that in the next two months.”
At the time, FMN had around N75.8 billion in net debt as of the first quarter.
The company said it was pursuing an organic growth strategy and planned to expand its edible oil refinery and grow the reach of its animal feed products. Today, Honeywell Flour Mills now has N26.2 billion market capitalisation as share price ended at N3.30.
Flour Mills Nigeria Plc engages in farming, flour milling; and production of pasta, noodles, edible oil, refined sugar, and livestock feeds. It operates through the following segments: Food; Agro-allied; Sugar; and Support Services. The Food segment focuses on the milling and sales of flour and rice and production and sales of pasta, snacks, sugar, and noodles.
The Agro-Allied segment includes farming maize, cassava, soya, sugar cane and oil palm, and production and sales of fertilizer, edible oils, and livestock feed.
The Sugar segment comprises planting and processing of sugarcane; refining and selling of sugar; and sale of by-products from sugar refining. The Support Services segment manufacture and market laminated woven polypropylene sacks and flexible packaging materials.
The company was founded by George Stravos Coumantaros on September 29, 1960, and is headquartered in Lagos, Nigeria. #FMN Plc Trades Lower 2-Month After Honeywell Acquisition Notice
