Presco Plc, a Nigerian based Crude Palm Oil (CPO) producer, is set to acquire Saro Oil Palm SOP for a consideration of $46.7 million, as part of its push to diversify its earnings.
To support the execution of the Company’s strategic initiatives and ensure a strong financial foundation, the Board has proposed raising up to ₦250,000,000,000 through a Rights Issue to existing shareholders.
SOP, incorporated in Nigeria on 4 July 2019 is an integrated agro-industrial company specialised in the cultivation of oil palm, extraction of crude palm oil and palm kernel oil, production of specialty oils and fats and distribution of refined oil products and a wholly owned subsidiary of SIAT SA.
Saro Oil Palm is a related party to Presco, being a subsidiary of SIAT SA, a key shareholder in Presco.
As of January 2025, the company had 5,000 hectares planted and is targeting a total of 8,000 hectares by the end of 2025.
The cultivation of Fresh Fruit Bunches is expected to commence in 2026, with a production target of c.28,000 metric tonnes. Additionally, as part of its strategic initiatives, the company plans to expand into palm oil milling by installing two milling units, with processing capacities of up to 60 tonnes and 30 tonnes of FFB per hour, respectively.
Presco had earlier in 2024 acquired a 100% equity stake in Ghana Oil Palm Development Company (GOPDC) for $124.92 million.
The proceeds from the Rights Issue will be deployed towards the refinancing of existing debt obligations, settlement of the outstanding consideration for the 100% acquisition of GOPDC, settlement of the consideration for the Proposed Acquisition of SOP and creation of a financial buffer to support business expansion
“The Transactions will position Presco as a large African conglomerate with an expanded customer base and increased market share within Africa. Presco’s plantation size is expected to increase by 37% from c.43,547 hectares to c.59,760 hectares, further solidifying its position as a leading oil palm producer in Africa,” Presco said in a disclosure on the NGX.
GOPDC had an operating profit of 530 million Ghana Cedis ($49.5m) at the end of 2024, while SOP is not forecast to be profitable until 2027.
Rationale for the Acquisitions and expected benefits
The Directors of Presco are of the opinion that the Transactions would create significant value for shareholders and relevant stakeholders of the Company for the following reasons amongst others:
Currency Diversification: Presco currently generates almost all of its revenue in local currency, while GOPDC generates c.41% of its revenue from export sales primarily in US Dollars and Euros. The currency diversification mitigates the impact of adverse exchange rate movements on the Company’s financial performance.
Economies of Scale: The Transactions 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.
Long-Term Organic Growth and Strategic Land Bank: The Proposed Acquisition presents a compelling opportunity to unlock significant long-term growth for Presco and deliver substantial value to shareholders. By acquiring SOP, Presco can accelerate its expansion from c.43,547 hectares to c.59,760 hectares – an achievement that would typically take 3–5 years organically due to the challenges of land acquisition and capex requirements.
SOP’s well-positioned and attractive land bank of over 14,000 hectares provides a strategic advantage, offering a ready platform for scalable and sustainable growth without the delays and uncertainties of securing new land enhancing the maturity profile of Presco’s plantation.
Access to capital: With the expected increase in market value and increased investor confidence, Presco will have improved access to capital through secondary stock offerings and bond issuances post- the Transactions. The synergy between the entities can potentially increase the overall valuation of Presco, thereby making it more attractive to investors.
Enhanced Competitiveness through Complementary Strengths: The enlarged Presco Group will benefit from leveraging individual company strengths and exploiting synergies across the supply chain. bolstering its competitive position in both domestic and regional markets.
The Acquisition and Proposed Acquisition are expected to drive increase market value of the larger entity listed on the Nigerian Exchange Limited (NGX) post the Acquisitions, according to Presco.
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