Olam International Limited, a global agribusiness company with its head office in Singapore, today announced that it has entered into an 80/20 joint venture with the Lababidi Group (LG) to set up a port-based sugar refinery in Nigeria.
The total project cost amounts to approximately US$200 million, which is expected to be phased over three years from 2011 to 2013.
According to a statement by Olam, the project cost is expected to be funded by 50% of equity (US$100 million) and 50% of debt (US$100 million). Olam’s equity contribution for its share of investment would be approximately US$80 million. LG will contribute about US$20 million in equity investment.
LG is a diversified business group with interests in wheat milling, telecommunications and port real estate. The group was formerly one of the top three wheat millers in Nigeria until it divested Crown Flour Mills to Olam in January 2010. It continues to operate wheat mills in Guinea Conakry and controls Starcomms, Nigeria’s fourth largest telecommunications operator and West Africa’s largest fixed and wireless telecommunications provider.
Sunny Verghese, Olam’s group managing director and CEO, said: “In September 2008, Olam had indicated its intention to set up a sugar refinery in Lagos to access the large and growing demand for sugar in Nigeria. Olam has developed capabilities in the sugar value chain by investing in sugar milling in India and sugar refining in Indonesia in the last few years. We are now excited to have this opportunity to enter into a joint venture with LG to set up a port-based sugar refinery in Nigeria.”
LG’s chairman Chief Maan Lababidi said: “Olam is today the largest non-oil exporter out of Nigeria and one of the most diversified global agri-companies in terms of product portfolio, geographical spread and value chain participation. We believe that Olam’s global network in sourcing, procurement, extensive marketing and distribution within Nigeria, strong risk management culture and sugar refining expertise will be critical to the success of our sugar refinery project in Nigeria.”
The proposed sugar refinery will be located in Tincan Island, Lagos on a site adjacent to the port, leveraging LG’s port land leasehold rights.
According to Olam, a port-based sugar refinery enjoys costs and logistics advantages as compared to an inland facility, as well as better access to importing markets in ECOWAS and the rest of Africa.