Olam International has acquired Nigerian dairy group Kayass Enterprises for US$66.5m.

Kayass manufactures and markets dairy products under brands including Blue Boat, Nature‘s Fresh and Yo Jus. It operates two production plants in Lagos: a dairy products factory established in 2009 and a milk powder packaging facility.

Olam said the move furthers its packaged foods strategy, which focuses on leveraging its “strong” African footprint and local knowledge to benefit from the growth opportunity offered by the expanding  population, changing demographics and consumption habits of African consumers.

The Singapore-based agribusiness firm added it hopes to benefit from back-end synergies across raw material sourcing, processing, logistics, warehousing and existing distribution infrastructure.

To this end, Olam said it has developed a retail sales and distribution structure – as well as a differentiated NPD and marketing strategy – across key categories and markets in Africa. The firm has focused on categories including pasta, biscuits, candy and dairy. Targeted markets include Nigeria, Ghana and Cote d’Ivoire in west Africa. 

“This acquisition is an attractive proposition for our packaged foods business to enter and scale up in another large and attractive packaged foods category in Nigeria,” Olam’s SVP and head of packaged foods, M Ramanarayanan said.

“We believe that Olam, combined with the assets and capabilities of Kayass, will be competitive in offering differentiated products based on our best practices in manufacturing, global sourcing, product development and innovation, branding and marketing.”

The deal will be funded through internal accruals and borrowings, Olam said. It is expected to be earnings accretive from fiscal 2014. Olam expects to deliver 20% in EBITDA margin by fiscal 2016 and generate an equity IRR of 35% on this investment.