UAC Nigeria’s N182.4 billion acquisition of CHI Limited is now the biggest M&A deal we’ve seen in Nigerian consumer goods. This isn’t just a big number; it signals a major shift in UAC’s ambition. Will it pay off?

Consider this: UAC projects a massive revenue jump by 2025 – over 200%. The goal is to become a dominant force in food and beverages. Forecasts put the combined CHI and UAC Foods revenue at a hefty N615 billion. That’s a serious play.

Nine-month figures for 2025 show the expanded group already hitting N717 billion. Comparing that to UAC’s pre-CHI N223 billion shows just how transformative this acquisition could be. EBITDA also saw a significant leap, jumping to N67 billion.

How did they finance it? UAC dipped into its cash reserves for N30.8 billion, securing a USD-denominated bridge loan for the remaining N151.6 billion. The loan’s priced at SOFR plus 5.5 percent. The plan is to refinance via bond issuances and term loans, possibly starting in late 2025 or early 2026. Interestingly, UAC claims the USD exposure is fully hedged, which is reassuring. Currency risk is always a worry.

The sheer size of CHI dwarfs UAC’s existing operations. CHI’s workforce significantly surpasses UAC’s. It’s a much larger machine to integrate. Plus, UAC anticipates a huge jump in net working capital – a 341.5 percent increase. The company is leveraging this projected growth to secure working capital financing. All that debt, close to N270 billion, could raise eyebrows, but UAC insists cash flow comfortably covers debt service.

Equity raise? Not in the cards, according to UAC’s CEO. The company believes it has enough cash flow.

Here’s a snag: CHI’s revenue grew impressively, but margins took a hit. Operating margins shrunk from 15% to a projected 6%. Still, UAC seems confident they can turn this around, pointing to their success in improving UAC Foods’ margins. It’s a proven strategy, perhaps?

For now, CHI operates independently under a special purpose vehicle. Integration into existing UAC subsidiaries isn’t planned. Continuity seems to be the theme, as most of CHI’s leadership team stayed on.

Ultimately, the combined UAC and CHI represents a consumer goods behemoth. Consider the brands: Gala, SWAN Water alongside Hollandia, Caprisun, and Chivita. Together, they control a portfolio of over 26 brands. This could really shake up the Nigerian consumer market. Time will tell if this N182.4 billion bet pays off, but it certainly sets the stage for a new era in Nigerian FMCG.

Keywords: UAC Nigeria, CHI Limited acquisition, Nigerian consumer goods, UAC revenue growth, UAC debt financing, CHI operating margins, Nigerian FMCG, consumer goods brands