South Africa’s largest food company, Tiger Brands, announced it has agreed to sell its 51% stake in its Ethiopian business, East African Tiger Brand Industries (EATBI) for an undisclosed amount to its joint partner, East African Group (EAG) Plc, which owns the other 49%, reports Reuters.
Following a review of EATBI and its core activities, the two partners collectively decided that EAG would see better progression under the ownership of EAG, with EAG making an undisclosed offer for the business that Tiger Brands stated was “considered fair and reasonable”.
The divestment of its Ethiopian business follows only months behind Tiger Brands December sale of its Nigerian business to Dangote Industries for a cash consideration of US$50 million, according to Bloomberg. Under the terms of that agreement, Tiger will transfer its 65.7% stake to Dangote for a nominal $1 and will write off loans made to the operation totaling US$46 million.
Founded in 2010 through a joint venture between Tiger Brands and East African Holding, East African Tiger has recently been facing increasing pressure in the Ethiopian market due to growing competition in the food space.
Last year, UK-based investment firm, Vasari Global, invested $36 million behind rival Ethiopian food manufacturer, Ahadukes, and in partnership with local businessman, Solomon Wondimneh, established the business’ maiden factory with the goal of supplying the East African market, according to The Africa Report.
“It’s a brown-field operation,” said Vivian Imerman, chairman of Vasari Global. “Two years ago, it was just bare land. We built a world-class food facility that will comply with most international standards. The building itself is brand new and the equipment that we’re putting in, of course, is all brand new, state-of-the-art European equipment.”
Vasari plans to increase its investment to US$120 million as its production lines expands to include biscuits, pastas and other high-demand consumer goods.
The sale of EATBI by Tiger Brands is remains subject to regulatory approvals, however it is expected to close no later than November of this year, and is not expected to have a materially negative impact upon Tiger Brands’ earnings and net asset value per share.