Nigeria’s oil palm company, Presco Plc is presently in talks to acquire a 100% equity stake in the Ghanaian Oil Palm Development Company (GOPDC).
The acquisition is projected to amount to $124.9 million, with the purchase of 70,580,000 ordinary shares of GOPDC at a price of $1.77 per share.
According to a corporate disclosure by Presco accessed by Nairametrics, Presco will make an initial deposit of $64.962 million, with the remaining balance to be settled in the future.
Presco expects that the deal will help it in its currency diversification efforts, as GOPDC generates about 41% of its revenue from export sales.
GODPC is currently a subsidiary of Societe d’Investissement pour l’Agriculture Tropicale (Siat) SA, one of the key shareholders in Presco. The company’s operations are similar to Presco’s, being into the cultivation of oil palm and extraction of crude palm oil and palm kernel oil, as well as the production of refined oil products.
About GOPDC
GOPDC presently operates from two oil palm estates in the Eastern Region of Ghana – the Kwae Estate and Okumaning Estate, with about 21,000 hectares of oil palm plantations, of which 13,000 hectares are developed.
The company presently has processing facilities which comprise of a 60 metric tonnes per hectare fresh fruit palm oil mill, 100 metric tonnes per day refinery, 60 metric tonnes per day palm kernel mill, a fractionation plant, and a palm kernel cake pellet plant.
The company has an annual production capacity of 35,000 tonnes of palm oil and palm kernel oil. It also has a storage capacity of 21,000 tonnes.
GOPDC manufactures red palm oil and vegetable oil under the “King’s” brand. The company also employs about 30,000 workers during its peak harvest season.
Details of the deal
For the year ended December 31, 2023, GOPDC recorded a net revenue of 456.35 million Ghana Cedis (~ $30.6 million). It posted a gross profit of 270.35 million GHc, as well as an operating profit of 188.18 million GHc during the year.
During the fiscal year ending December 31, 2023, GOPDC recorded an operating margin of 41.2%, showcasing its impressive operational output.
According to forecasts, the company’s revenue is expected to hit 1.2 billion GHc ($80.95 million) by 2028, with its operating margin expected to decline slightly to 39.7% (2028 operating profit: 479.14 million GHc).
Presco notes some of the reasons for the deal including increased market share and customer base. The company expects that the transaction will cause its plantation size to increase by 19%, from 43,457 hectares to 51,760 hectares.
Another rationale proposed by the company is economies of scale, as the deal is expected to help Presco strengthen its competitive position, as well as optimize its resource utilization.
It is expected that the deal will lead to an increase in the market value of Presco Plc on the NGX, thus allowing the company easier access to capital in the future.
Presco, SIAT, and GOPDC
Earlier in the year, it was announced that Oak and Saffron, a company owned by Saroafrica International, had completed its acquisition of a majority stake in SIAT SA. However, this takeover is not yet reflected in the company’s financials.
Prior to the takeover of SIAT, the group owned 100% equity in GOPDC. Hence, it is probable that Presco’s proposed takeover of GOPDC is linked with a move by Oak and Saffron to consolidate Presco’s listing on the NGX by merging it with other SIAT subsidiaries.
Presco is one of the most profitable companies in the NGX, as it posted a pre-tax profif ot N50 billion in FY 2023, representing a 152% growth from the N19.8 billion pre-tax profit recorded in 2022.
With a net income of N32.9 billion, Presco Plc posted a return on equity of 57.5% for FY 2023. The company also posted a dividend yield of 10%, posing one of the best returns on investments for NGX investors.