Presco looks to expand into Ghana with $125m purchase of Ghanaian oil palm company

Business a.m.

Nigeria’s leading oil palm company, Presco Plc, has announced plans to acquire a 100 percent equity stake in the Ghanaian Oil Palm Development Company (GOPDC).

The acquisition, which is set to cost Presco a total of $124.9 million, will involve the purchase of 70,580,000 ordinary shares of GOPDC at a price of $1.77 per share.

Presco Plc outlined the financial details of the acquisition of GOPDC in a corporate disclosure on the Nigerian Exchange Group (NGX). The company stated that it will be making an initial deposit of $64.962 million, with the remaining balance of $59.938 million to be settled in the future.

Presco, in its corporate disclosure on the NGX, explained that the move aligns with the company’s objective of pursuing growth strategies that will drive long-term profitability, and position it as a leader in the West African oil palm market.

In its corporate disclosure, Presco Plc’s directors highlighted the anticipated benefits of the proposed acquisition of  GOPDC. The directors opine that the transaction will create an expanded customer base and increase Presco’s market share within Africa.

The acquisition is also projected to position Presco as a significant African conglomerate, with an increased plantation size of approximately 8,213 hectares. This will result in a cumulative plantation size of 51,760 hectares, representing a 19 percent growth from the existing 43,547 hectares.

Presco highlighted the benefits of the proposed acquisition in terms of currency diversification. It stated that in 2023, all its revenue was generated in the local currency, while GOPDC, the company to be acquired, generated 41 percent of its revenue from export sales primarily in US Dollars and Euros.

Presco further explained that this revenue diversification would mitigate the impact of any adverse exchange rate movements on the company’s financial performance, providing a hedge against potential currency volatility and resulting in a more stable and robust financial position for the company.

“The transaction will strengthen Presco’s competitive position and drive productivity within the Company through cost savings from streamlining its processes; optimising resource utilisation and positioning more effectively to meet the market demands as a consolidated oil palm business,” Presco stated.

According to Presco, the proposed acquisition of Ghanaian Oil Palm Development Company would have a positive impact on the market value of the resulting entity. This is expected to result from an increased investor confidence in the larger, more diversified company, which would in turn improve Presco’s access to capital through secondary stock offerings and bond issuances post-transaction.

GOPDC has significant processing facilities, with the capacity to process 60 metric tonnes of fresh palm fruit per hectare at its palm oil mill, refine 100 metric tonnes of palm oil per day at its refinery, and mill 60 metric tonnes of palm kernel per day at its palm kernel mill. Additionally, GOPDC operates a fractionation plant and a palm kernel cake pellet plant. The company’s processing facilities allow it to produce 35,000 tonnes of palm oil and palm kernel oil annually, with a storage capacity of 21,000 tonnes.

Dwelling on the increased competitiveness that would result from the proposed acquisition of GOPDC, Presco stated that the combined strengths of both entities would provide a powerful synergy across the supply chain, creating a more competitive, integrated, and efficient business model.

GOPDC, currently a subsidiary of Societe d’Investissement pour l’Agriculture Tropicale (Siat) SA,a  major shareholder in Presco Plc,engages in similar business activities to that of Presco. Both companies focus on the cultivation and processing of palm oil, with operations spanning the entire value chain from cultivation and extraction to refinement of the products.

GOPDC operates from two oil palm estates in Ghana’s Eastern Region—the Kwae Estate and Okumaning Estate—covering a total area of 21,000 hectares, of which 13,000 hectares are developed and in operation.

Presco Plc’s proposed acquisition of GOPDC is expected to significantly bolster the company’s market value on the Nigerian Exchange (NGX), paving the way for easier access to capital in the future. The announcement comes as Presco continues to enjoy strong financial performance, having reported a pre-tax profit of N50 billion in FY 2023, representing a 152 percent growth from the N19.8 billion recorded in 2022.