Honeywell Sets Sights On Key Growth Sectors

David Adeleke
There are numerous reasons why Nigeria, a member of the Next Eleven (N-11), the eleven countries that are said to have the potential to become the next biggest economies in the 21st Century by Goldman Sachs, has increasingly been viewed as a viable attractive investment destination. Like other countries in the group, ‘Nigeria’s attractive demographics, increased domestic consumption and other factors could make it a significant contributor to global growth in the next decade’.

The story of investment in Nigeria would be incomplete without mentioning Honeywell Group, a family-owned investment holding company of Nigerian heritage which has a stated vision of “creating value that transcends generations”. This is why during the centenary celebrations in 2014, Honeywell Group was recognized by the Federal Government as one of the top 100 companies in the country.

Founded in 1972 by Dr Oba Otudeko, Honeywell Group, started as a food trading company servicing the West African region before pivoting to importing a variety of goods for the domestic Nigerian market. Since then it has evolved to become an investment company with interests across various sectors of the Nigerian economy including foods, real estate, energy, infrastructure, financial services and many more. The group’s participation in these sectors is done through companies such as Anchorage Leisures Limited, Uraga Real Estate Limited, Pivot GIS Limited, HOGL Energy Limited and until recently Honeywell Flour Mills Plc (more on this later).

Honeywell Group has a rich pedigree of making strategic investment moves, which has seen it enter new sectors through partnership and exit investments at opportune times for both the Group and its portfolio companies. Examples abound including its early investment in Econet Wireless, Nigeria’s first GSM operator to go live, which it successfully exited through a sale to Airtel, to the transfer of its significant holdings in Fan Milk Nigeria to the Abraaj/Danone Consortium. Honeywell Group’s divestiture from Honeywell Flour Mills Plc (HFMP), which will see the Group transfer a 71.69% stake in HFMP to Flour Mills of Nigeria (FMN) is another recent example. The transaction, still subject to regulatory approvals, is a move by both companies to create a more resilient national champion in the Nigerian foods industry while ensuring that thousands of jobs will be preserved, and thousands more will be created in the future.

This combination of FMN and HFMP will bring together two trusted and entrenched brands, creating a single entity that is better positioned to benefit the growing Nigerian population and leverage opportunities stemming from the African Continental Free Trade Area (“AfCFTA”).

The World Bank highlights AfCFTA as “a major opportunity for African countries to bring 30 million people out of extreme poverty and to raise the incomes of 68 million others who live on less than $5.50 per day.” Once it has been successfully implemented, the AfCFTA will advance trade operations that minimise bureaucracy and make customs procedures simpler. This, according to the World Bank, could drive at least $292 billion of the $450 billion in potential income gains.

AfCFTA also opens up opportunities for organisations that are looking to tap into the vast network created by a market of 1.3 billion people connected across 55 countries on the continent, all with a combined GDP of$3.4 trillion. This, in essence, creates a foundation to change the fortunes and economic realities of more than 30 million people currently living in extreme poverty. This kind of playing field is one that the deal between Honeywell Group and Flour Mills of Nigeria Plc sets the new combined entity upon.

Usually, transactions like this raise questions of job security. How many staff will be retained? How many will be let go? Those are important questions worth asking. However, according to official statements, the merger is “about creating a stronger combined business” to enhance growth prospects and potential future job creation. It isn’t expected to impact the workforce or operations of either business heavily. According to Honeywell Group, the sheer size of the transaction will provide employees of the consolidated company with even more opportunities to develop their careers and improve the quality of their skills within the parameters of a new and enlarged organisation. In theory, this means the new company will have even more fuel to inject more jobs into the economy.
Beyond the intricacies of the transaction, the proposed combination will bring together FMN’s offerings that include grain-based foods, sugar, starches, oils, spreads and breakfast cereals with HFMP’s diverse and differentiated range of carbohydrate products. This means a wider variety of products for the millions of customers of both companies.

And with an over 85-year combined history, the wealth of experience between the companies can help steer solutions that will assist the Federal Government in its bid to achieve its SDG zero hunger objective. With over 8.7 million Nigerians battling food insecurity in North-East Nigeria alone, there is a rising need to invite and encourage measures that will provide long-lasting solutions for Nigeria’s over 200 million population.

Now, with this momentous exit from HFMP, Honeywell Group will be strongly positioned to consolidate and expand its investment activities, including as a partner of choice for investors in key growth sectors. This will give the investment company a golden opportunity to focus on strategically deploying capital across the Nigerian economy while seeking to create sustainable value for its stakeholders. This should position the company as one to watch in 2022.
Going forward, it has been stated that HFMP will remain listed for the foreseeable future as it promises to maintain “the highest standards of corporate governance in the best interest of all shareholders, including minority shareholders.”

As this deal closes, Honeywell Group has stated that it intends to continue its journey of refining and growing its investment portfolio. This will see it consolidate in sectors where it currently operates, such as real estate, energy, financial services, infrastructure. We expect the company to announce more strategic initiatives in the coming months.

David Adeleke is a writer, communications strategist, and media analyst. He is the author of Communique, a monthly newsletter that analyses the Nigerian media industry, and a columnist for How We Made It In Africa.