Uganda’s Lato milk eyes Kenya buyout in IFC deal
Workers arrange cartons of Lato milk products in Kisumu on January 17, 2020.
Uganda’s Pearl Dairy Farms Limited, owners of the Lato milk brand, is targeting an acquisition in Kenya following a $21 million (Sh2.8 billion) investment by the International Finance Corporation (IFC) to drive expansion in the two East African countries.
The World Bank’s private sector investment arm said in a disclosure that the investment in the form of a senior loan will support capacity expansion plans in Uganda and Kenya, including upgrade and capacity increase of the powder milk plant in Uganda, and acquisition of a packing plant in Kenya.
The IFC will invest an extra $14 million (Sh1.87 billion) towards refinancing the firm’s existing Standard Chartered Bank loan in Uganda.
“IFC, together with FMO, will provide a $35 million long-term loan package to support the project,” said the IFC.
FMO is a Dutch development bank structured as a bilateral private-sector international financial institution based in The Hague, Netherlands.
The Mbarara-based Pearl Dairy was established in 2009 and its product portfolio includes UHT milk, powder milk, flavored milk, yogurts, butter, and honey under the Lato brand. The company supplies its local market as well as most of East Africa.
It sources milk from over 15,000 farmers (two-thirds in Uganda and a third in Kenya) and distributes it across the continent to retailers, wholesalers, and end-consumers through 80 sales points in the two operating countries.
IFC extended the company a $6.5 million (Sh868.38 million at the current exchange rate) loan to set up the state-of-the-art Uganda milk processing plant.
The milk processor, which falls under the auspices of Midland Group, is owned by the families of tycoons Bhasker Kotecha (50.5 per cent) and Anand Kapoor (49.5 per cent).
The disclosure by IFC came barely a fortnight after Kenya’s Trade and Investment Cabinet Secretary Moses Kuria said Lato had signed a deal with the State-owned financier Kenya Development Corporation (KDC) to invest jointly in dairy ventures.
“The meeting focused on mutual economic and investment objectives by the two countries as a follow up to the various bilateral meetings between to facilitate regional co-investment opportunities in strategic sectors,” he said in reference to bilateral talks he held in Nairobi with Uganda’s Treasury Permanent Secretary Ramadan Ggoobi.
Mr Kuria said Lato would invest in Kenyan milk factories that are currently struggling in a bid to revive them in what will see the Ugandan firm take the fight for control of the lucrative milk sector to the doorstep of some well-known local dairy brands.
