₦airaland Forum

Nigerian Capital Market – Lessons from Dangote and Dangote Flour Mills Plc 

What will you call a man that sold a loss making business for $200 million, bought it back for $1 and sold it again for $362 million? I call him Dangote! Join me to take lessons from his business prowess. 

Lesson 1: the art of negotiating

In 2012, Dangote sold 65% of Dangote Flour Mills Plc (DFM) to Tiger Branded Consumer Goods Plc (TBCG) for $200 million.

In 2013, TBCG increased their stake to 70% to become the owners of the company and soon changed the company’s name from Dangote Flourmills to Tiger Branded Nigeria Ltd.

Dangote didn’t lose any sleep selling the company because it was a loss making business (the company made a loss of N2.8 billion in 2012).

TBCG didn’t have a problem buying it because they were sure they could turn it around considering their status as South Africa’s largest consumer goods producer.

Sadly, the company reported a loss of N12.6 billion in 2015 from N6.1 billion loss in 2014, and N7.9 billion loss in 2013.

On 11 December 2015, Tiger Brands and Dangote Industries Limited reached an agreement with respect to the sale of Tiger Brands’ shareholding (now 65.7%) in the Company to Dangote Industries Limited.

How much did Dangote pay to buy back DFM?

He paid $1 for 65% stake, same stake he sold of circa $200 million less than 4 years ago.

As part of the deal, Dangote would inject N10 billion into TBCG while Tiger Brands would settle all outstanding debt of about N5 billion.

This is a masterclass in deal making by all standards, when you sell a company for $200 million and come back to buy it for $1, it’s a stuff of legends, it’s no fluke. Did I hear what about the N10 billion? Don’t make a mistake, not a kobo will go to TBCG, it’s an injection of cash into the business, it’s a working capital for the business.

Before you think it was a fluke and not so much to be learnt, listen to Ian Cruickshanks:

“The chips are down now, it’s raining disaster. The sellers saw South Africans with deep pockets coming. We have shown ourselves to be totally naive in negotiating outside our own borders and have been taken for a ride,” Ian Cruickshanks, chief economist at the South African Institute of Race Relations

The punch line: “…totally naïve in negotiating…”

Lesson 2: in business, you must know what you are stepping into, no matter how promising, always do your due diligence.

It’s not sufficient to say it’s Dangote’s Company so it must be good. It’s Nigeria, there is a market so it must be profitable. In business, a deep understand of the business environment is everything.

An understanding of your business environment will reveal where your opportunities are and the possible threats to your business. This understanding will produce realistic plans, forecasts and ensure their effective implementation.

As big as Tiger Brands is, they failed those basics. Listen to what the CEO, Peter Matlare said:

“…substantial new flour capacity had come on stream in Nigeria between 2010 and 2012, when the deal was negotiated”

In perspective, if you make plans for a new market with the assumption that there is a potential to grow local capacity from 700 to 1,000 when in actual fact your competitors had grown it to a possible capacity of 1,600, you are on your own.

Again, they failed in due diligence. For a loss making business, you cannot be hanged for being too careful but they were not even careful enough.

“Someone is responsible here. Was the due diligence done properly and who did it? Were the numbers checked out by auditors and if so, let’s ask the auditors how far their professional insurance cover goes” Cruickshanks said.

Lesson 3: when you realise your mistake, take your lesson, take your loss and move on, else you will lose everything.

You have to respect the bravery and elegance of TCMG in the face of a huge loss. They were brave and swift in taking their loss. They wrote off $120 million dollars and assumed the debt of N5 billion, the CEO stepped down, the company received $1 from Dangote as consideration for 65% stake and moved on.

Tiger Brands chief operating officer Noel Doyle, said at that time that it was a “good outcome” for the group, as it protected the interests of 3,200 people in Nigeria. “It has given us as elegant an exit as is possible in the circumstances.”

Welcome Olam!

Some months back, Olam International made a cash bid of 130-billion naira ($362m) to buy Dangote Flour Mills (DFM) of Nigeria.

Via a scheme of arrangement that became effective on 1stNovember, 2019, Olam agreed to pay Holders of the shares of DFM N24 each per share for their holdings.

As at close of business yesterday 8th November, 2019, a lot of shareholders had received their payment, it was a good deal for shareholders of Dangote Flours by all standards, and Olam was glad to take on such a huge investment and challenge.

“We are confident about the growth prospects in this country, and this acquisition, doubling our installed capacity here, is evidence of our long-term commitment to the Nigerian economy,” KC Suresh, head of Olam’s grains and animal feed division, said.

On 30th October, 2019 DFM released their 9 months financials, it was another loss story of N6.8 billion. We hope it won’t be a de ja vu.

Whatever the outcome, the lessons from this Dangote Flour business case will remain a masterclass to be studied by foreign investors for a very long time.

We can only wish Olam well.

Final Lesson: billionaires never stop consolidating

On 4th November, 2019, Dangote Sugar Refinery announced a proposed business combination with Savannah Sugar Company Limited (SSCL), a private limited liability company engaged in sugar cane farming and sugar milling.

Dangote moved on from Flour to Sugar the same week he received consideration for his holdings in Flour, your bet is as good as mine, Sugar is sweeter.

All hail King Dangote!

https://www.tekedia.com/nigerian-capital-market-lessons-from-dangote-and-dangote-flour-mills-plc/

Kylekent59:
It is not possible to jump out of a helicopter when it's about to crash else you get cut into halve by its fan blade.

Embrace for impact is the only way to survive.

It is possible to jump out of a chopper when it's about to crash but it's not safe rather.You would have to brace for impact before it touches the ground.You should not attempt to disembark from the chopper until the rotor has come to a complete stop and the anti collision light is off.

Once you see rape caption,you don't need to check the name.

Busola should have learned from Atiku

Ever heard of the word resonance before?Look it up and you won't be far from the answer to your question.

The Supreme court of Nigeria pronounced a very controversial ruling this morning in Abuja, declaring that all women with clitorises longer than 7,5 centimetres (3 inches) can now be legally considered as men.

In a unanimous decision, the five-member Supreme Court panel, led by Mary Odili ruled that 36-year old Isioma Adeyemi’s request was “perfectly sound and legitimate”, ordering that her legal status be changed immediately.

Ms. Adeyemi celebrated her victory which puts an end to a 7-year legal battle for the woman with an exceptionally large clitoris.

“This is the greatest day of my life! My first husband repudiated me because my clitoris was bigger than his penis, now I finally get some kind of justice.”

Ms. Inna Shevchenko, leader of The radical feminist exhibitionist group Femen, describes the ruling as “a great advancement for African women in general”.

“A small number of women just obtained a great boost in their legal status and are now in a position to help their peers. It’s a great day for women!”

Meeting journalists is Strasburg, in France, the leader of Femen, Inna Shevchenko, described the ruling as a great advancement for women in Africa.

Under Nigerian law, Ms. Adeyemi can now own land, have several wives, work at night, and can no longer be legally beaten to the level of “grievous hurt” by her husband or male relatives.

According to governmental experts, over 600 other Nigerian women have sufficiently big clitorises to apply for a change to their legal status.

Nigeria is only the second country in the world to offer women with large clitorises the option of being legally considered as men.

Uganda offers the same choice to all women with clitorises longer than 5 centimetres (2 inches). Only 11 women have legally changed their status to men since the law was passed in 2011.

https://worldnewsdailyreport.com/nigerian-court-determines-woman/

The guy on uniform carrying a bag with the president's battery.

I know this specie of yam.It is called ogbawurunkwu.Its perennial by nature.

Hitman hires hitman who hires hitman who hires hitman who hires hitman who tells police


Five hitmen have been jailed for attempted murder, after each one avoided carrying out the contract themselves so they could make a profit.

Chinese businessman Tan Youhui was looking for a hitman to take out a competitor, Wei Mou, and was willing to pay 2 million yuan (£218,000) to get the job done.

The hitman that Mr Youhui hired, decided to offer the job to another hitman, for half the original price.

The second hitman then subcontracted to another hitman, who then subcontracted to a fourth, who gave the job to a fifth.

However, hitman number five was so incensed at how much the value of the contract had fallen, that he told the target to fake his own death, which eventually led to the police finding out about the plot, Beijing News reported.

The businessman and the hapless assassins were all convicted of attempted murder by the court in Nanning, Guangxi, following a trial that lasted three years.

The original dispute occurred in 2013, when Wei decided to sue real estate developer Youhui.

Worried he would lose the lengthy court battle, Tan hired a hitman named Xi Guangan to kill Mr Wei.

However, Xi contacted another hitman, Mo Tianxiang offering him half the original sum.
Mo then decided to contact a third hitman, Yang Kangsheng, who quoted an upfront price of 270,000 Yuan to carry out the hit, with 500,000 Yuan to be handed over once it was done.

However, Yang Kangsheng passed it on to another hitman, Yang Guangsheng, for a further reduced fee.

The contract finally came to the fifth hitman, Ling Xiansi, who eventually told the police.
Tan, who hired the original hitman, was jailed for five years, while Xi, the first hitman, was sentenced to three years and six months.

Yang Kangsheng and Yang Guangsheng were sentenced to three years and three months, Mo was sentenced to three years, and Ling was sentenced to two years and seven months.

https://metro.co.uk/2019/10/23/hitman-hires-hitman-hires-hitman-hires-hitman-hires-hitman-tells-police-10971438/

Reno Omokri wrote:

"Despite the stringent bail conditions set for Nnamdi Kanu, Igbos wasted no time fulfilling it. Sowore’s bail terms are nowhere near as tough as Nnamdi Kanu’s, yet no one has stood for him.

"Yet, while he was in detention and court, many people were talking tough in his defence. It just tells you a lot about Igbo communal spirit as compared to other ethnic nationalities.

"If Sowore was Igbo, he would have been out of jail by now. An Igbo Senator, Enyinnaya Abaribe, risked jail, put his Senatorial office on the line, to stand as surety for Kanu.

"Are you trying to tell me that none of Sowore’s kinsmen have ordinary ₦50 million? I am yet to see a people who love themselves like the Igbo.

"In America, believe it or not, Igbo unions give new comers loans to set up their own businesses. I have seen news stories of destitute Nigerians abroad who need assistance. That can never happen to an Igbo. Other Igbos in that community will rally round and rehabilitate him or her. Let us all learn that self love from Ndi’Igbo and Nigeria will be better for it."

You just wanna give Piano fc hope this weekend

Booking system and getting on board for a ride is not flexible enough.It involves too much protocols.

Racoon:
Thought the zombies of this government said there is no love lost between the presidency and VP Osinbajo?

How come these Ondo-South and Remo "IPOB"
youth know & are protesting the VP victimization by the Buhari presidency cabal? Hypocrisy kills. Yoruba Ronu o!

Check the meaning "of no love lost" If they said there is no love lost between presidency and osibanjo,It simply means they agreed that there is enmity between them.

I can see a whole lot of signs of affluence but most times we fail to extend a helping hand to those who leave with us.Just look at the house help.

Phone is even justified because you it's something that you will be using always but much question is,why would someone buy 100% gold toilet and install in his house?

Why is everyone behaving like this?They don want to release sowore to falana after Court order and now big brother also has refused to release Tacha to her management after disqualification.Everyone is learning so fast from Aso rock.

That's called child's farming for election rigging purpose.

No provision for tile spacing in your calculations.Besides you can access tile calculators on Google and key in the figures.

You said this before your first tenure and you have done more than 100 days in your second tenure, still no solution.

They have started withholding names because other tribes are now involved

gwarotango:
Out of ten only 2 northerners that should tell you more about the region where the most prominent criminals come from

In a saner clime,Gandollar would have been on the run but as u can see he is protected.Maina pension fund is not in that list and so many northerners.You and your likes should keep deceiving yourselves

In a saner clime,Gandollar would have been on the run but as u can see he is protected.Maina pension fund is not in that list and so many northerners.You and your likes should keep deceiving yourselves.

What people dont know is, most prisoners in america are better of than so called free people in today's Nigeria.

What they wont tell u is there is a gbenga and not just Chukwuma

They will not tell you about Ajayi but will be quick to mention uche

Its very easy to say but the truth is women are not as generous as men.

Mtcheeew,This Regina that has Rochas okorocha's kind of legs.

I can connect to what this woman is saying.Its quite unfortunate that most Nigerian youths are indeed "first to comment youths "like profesor Wole Soyinka said.Take it or leave it,the corruption in Nigeria is endemic and I have had an experience related to this post.

I thought they said an igbo man is theiŕ ring leader?

Leno throws it out to Tierney down the Arsenal left. Bombs forward and feeds Pépé, cuts inside and beats his man, passes to Lacazette , little drop of the shoulder and plays a beautiful pass to Aubameyang. Goooooaaalll.

Arsenal 5 - 1 Manchester United

Afamed:
I guess you understand the difference between certificate and CTC?

You are the one that did not understand the whole shebang.PMB had in the past claimed that he submitted his original waec certificate with the army when he was enlisted.

Where are the feminists?