Kellogg intends to make a big splash in West Africa

Kellogg (K -0.2%) announces it will spend $450M to acquire a 50% stake in African distributor Multipro.

U.S. breakfast cereal producer Kellogg (Swiss: K.SW – news) said Tuesday it was investing $450 million to build sales of its popular brands in the rapidly growing West Africa market. Kellogg also has the option to buy a stake in Tolaram’s African unit.

Kellogg will fund its latest acquisition using worldwide cash and an increase in commercial paper financing of $350 million, the company said.

The expansion into Africa could work out well for Kellogg. Dufil Prima manufactures and markets several leading food brands, including Indomie noodles, which are often consumed at breakfast, as well as Minimie snacks, Power oil and Power pasta.

Kellogg Chairman and Chief Executive John Bryant said sub-Saharan Africa provides the company with a tremendous opportunity for growth and added that Tolaram is one of the largest food companies in Nigeria.

The partnership concluded Bryant is a great strategic fit for Kellogg.

Multipro is establishing other networks in other key countries in Africa such as Ivory Coast, Democratic Republic of Congo, Ethiopia and Cameroon. “This is another significant step towards providing affordable and wholesome nutrition for our expanding consumer base”, said Sajen Aswani, CEO, Tolaram Group. It represents a multiple of about 13 times 2015’s expected EBITDA. Reported earnings per share, excluding transaction and integration costs, will not be affected by the transaction in 2015 or 2016. It expects the deal to lower earnings by one penny a share in Q3, reports Reuters. The impact will be excluded for comparable earnings per share.