Onome Amuge
Presco Plc, a Nigeria-based agro-industrial giant, is on an ambitious path to cement its status as a continental leader in the palm oil sector, announcing a new $46.7 million acquisition alongside a N250 billion rights issue.
The strategic manoeuvres, detailed in a recent disclosure to the Nigerian Exchange (NGX), signal the company’s intent to diversify its revenue streams and build a multinational operation resilient to local economic headwinds.
The proposed acquisition of Saro Oil Palm (SOP), a Nigerian agro-industrial company, is the latest piece in a strategic puzzle that began with the company’s $124.92 million acquisition of a 100 per cent equity stake in the Ghana Oil Palm Development Company (GOPDC) in 2024.
The board has framed the deals as a transformative step, positioning Presco as a large African conglomerate with a significantly expanded customer base and market share. Following the transactions, Presco’s total plantation size is expected to increase by 37 per cent, from 43,547 hectares to 59,760 hectares.
To finance this expansion and solidify its financial footing, Presco is turning to its existing shareholders with a rights issue. The N250 billion capital raise is designed to serve a fourfold purpose: it will be deployed to refinance existing debt, settle the outstanding payments for the GOPDC acquisition, cover the consideration for the SOP deal, and build a financial buffer for future business expansion.
The acquisition of SOP presents a long-term growth opportunity. Incorporated in 2019, SOP is a relatively new player in the sector but brings with it a strategic land bank of over 14,000 hectares.
As of January 2025, SOP had already planted 5,000 hectares, with a target to reach 8,000 hectares by the close of the year. While the company is not forecast to be profitable until 2027, its future plans include the commencement of Fresh Fruit Bunch (FFB) cultivation in 2026, with a production target of 28,000 metric tonnes, and the installation of two new palm oil milling units.
A notable aspect of the SOP transaction is its nature as a related-party deal. Both SOP and Presco are subsidiaries of SIAT SA, a Belgian-based agro-industrial group that is a key shareholder in Presco. This familial relationship with a major investor is likely to streamline the transaction process and signals a clear consolidation strategy under the SIAT umbrella to create a more powerful regional entity.
Presco’s rationale for the acquisitions is multifaceted and speaks to the broader economic challenges facing Nigerian businesses. At the top of the list is currency diversification. Currently, Presco generates nearly all its revenue in the Nigerian naira, making it highly vulnerable to the country’s volatile exchange rate movements. The GOPDC acquisition changes this dynamic, as the Ghanaian subsidiary generates approximately 41 per cent of its revenue from export sales denominated in US dollars and euros. This provides a crucial foreign currency hedge, mitigating a significant financial risk for the company and enhancing its overall stability.
Beyond risk mitigation, the transactions are expected to deliver substantial economies of scale. By consolidating operations and streamlining processes across the enlarged group, Presco can drive productivity and achieve cost savings. The combined land bank and processing capacities are designed to meet market demands more effectively as a unified oil palm business. The larger operational footprint also provides a foundation for enhanced competitiveness, allowing the group to leverage the individual strengths of each entity and exploit synergies across the supply chain, strengthening its position in both domestic and regional markets.
The company’s board believes that the acquisitions will also improve its access to capital. The expected increase in market value and improved investor confidence resulting from the new acquisitions could make the company a more attractive proposition for investors. This enhanced financial standing would provide Presco with a better platform for future funding through secondary stock offerings and bond issuances, supporting its long-term growth aspirations. This is particularly relevant given Presco’s strong financial performance in 2024, when the company’s revenue more than doubled to N207.5 billion, partly driven by the partial consolidation of GOPDC.
