Tiger Brands Ltd., South Africa’s largest food producer, agreed to sell its 65.7 percent stake in its unprofitable Nigerian business to Dangote Industries Ltd. for $1, causing shares to shoot up in Johannesburg, Bloomberg reported.
Dangote Industries is run by Aliko Dangote, Africa’s richest man with a net worth of $16.5 billion, according to Forbes.
Dangote will infuse $50 million in the Johannesburg-based company, and Tiger will write off $46 million in loans that it made to the operation, eNCA reported.
Tiger Brands acquired 65 percent of Dangote Flour Mills in 2012 for $106.4 million from the Dangote conglomerate, BusinessDayLive reported.
In November, Tiger wrote down the full value of Tiger Branded Consumer Goods, a separate business formerly known as Dangote Flour Mills, and Deli Foods, by $126.4 million.
The transaction will ensure that Tiger Branded Consumer Goods “is maintained as a viable going concern, able to retain its employees and meet its obligations to its stakeholders,” according to a statement.
Falling crude oil prices — Nigeria’s main export — and currency restrictions have contributed to a slowdown in growth in Africa’s largest economy, Bloomberg reported.
“Sufficient capital will be injected into TBCG in order to stabilize the business and place it on a sustainable path,” Tiger said.
Tiger rallied as much as 10 percent and was 5.8 percent higher at 308.90 rand by 9:38 a.m. in Johannesburg, paring the drop this year to 16 percent, Bloomberg reported.