TIGER Brands Ltd., South Africa’s largest food producer, agreed to sell its stake in an unprofitable Nigerian business to Dangote Industries Ltd. three years after buying it. The shares surged in Johannesburg.
Dangote will provide Tiger Branded Consumer Goods Plc of Nigeria with an immediate cash injection of 10 billion naira (US$50 million), with Tiger transferring its 65,7% stake for a nominal US$1, the Johannesburg-based company said in a statement Monday.
Tiger will assume and settle debt that it’s guaranteed for the West African business, amounting to 5,6 billion naira, and will write off 700 million rand (US$46 million) of loans that it granted the operation.
Tiger last month wrote down the full value of Tiger Branded Consumer Goods, formerly known as Dangote Flour Mills, and Deli Foods, a separate business in the West African country, by 1,9 billion rand.
This added to previous impairments of 954 million rand after Tiger bought the business for about 1,5 billion rand in 2012. Growth in Africa’s largest economy has dropped to the slowest pace this decade following a plunge in prices for crude, its main export, while currency restrictions have added to unease among businesses and investors.
“Sufficient capital will be injected into TBCG in order to stabilize the business and place it on a sustainable path,” Tiger said. Dangote Industries is controlled by Aliko Dangote, Africa’s richest man with a net worth of US$13.5 billion, according to the Bloomberg Billionaires Index.
Tiger rallied as much as 10% and was 5,8% higher at 308,90 rand by 9:38 a.m. in Johannesburg, paring the drop this year to 16%.-Bloomberg