Uganda’s milk processing firm, the face behind the Lato brand, is set to acquire a Kenyan milk company in a transaction that will allow it to take on local firms and beat hurdles disrupting the supply and sale of its products in the country.
Maziwa, the non-operating holding company incorporated in Mauritius, has applied to the Comesa Competition Commission to acquire a 100 percent stake in Highland Creamers & Food Limited— a Kisii-based firm that started operations in 2015 and is behind the Farmily Milk brand.
In Uganda, Maziwa collects, processes and sells milk and milk products under its subsidiary Pearl Dairy Farms Limited while depending on the Kisii firm to help it sell its products in Western Kenya.
Read: Kenya re-opens doors for Uganda’s Lato milk
The value of the deal has not been disclosed but Pearl hopes to use the acquisition to set up a manufacturing base in Kenya, giving it quicker access to the market as opposed to bringing in the products from Uganda.
Pearl in April tapped a $35 million (Ksh5.36 billion) loan from the International Finance Corporation, promising to use $21 million (Ksh3.22 billion) in upgrading and increasing the capacity of its powder milk plant in Uganda and acquiring a packing plant in Kenya.
The Kisii firm is involved in the collection, processing, packaging and selling of UHT long-life milk and yoghurt in Kenya, making it an appealing fit for Pearl whose Lato brand is mostly popular in western Kenya.
“The transaction entails the proposed acquisition of 100 percent of the total issued share capital of Highland Creamers & Food Limited by Maziwa,” says the competition watchdog in a notice inviting comments on the proposed deal.
Having a processing plant in Kenya will help Pearl bypass supply chain challenges that have sometimes seen the Lato brand denied access to the country, escalating to a trade dispute between Nairobi and Kampala.
“The acquisition of the target (Kisii-based firm) will allow for a two-country manufacturing setup that will allow the merging parties to reduce turnaround time to customers and increase the value-addition in both Kenya and Uganda,” Pearl told the competition watchdog.
Read: Kenya, Uganda traders sign deal to end barriers
“The access to the two separate milk pools in Kenya and Uganda will also allow for growth in the local market without dependency on imports from other nations.”
The Mbarara-based Lato milk brand was established in 2012 by Pearl Dairy Farms which is owned by Midland Group.
Pearl has been expanding the access of Lato to new markets with Egypt, Kenya, Tanzania, and DRC Congo being its first international markets. Its other markets include Zambia, Ethiopia, South Sudan and Malawi.
The company rides on its Mbarara factory in Western Uganda to supply products, including milk powder, liquid milk, yoghurt, flavoured milk, butter, butter oil and ghee.
The proposed deal comes months after Kenya, in March, opened doors for the company to invest in local dairy factories. Pearl signed a deal with the State-owned financier Kenya Development Corporation to invest jointly in local dairy ventures.
Source: The East African