Indorama regains full control of urea plant following Actis exit

Singapore-based conglomerate Indorama is set to assume complete ownership of Indorama Eleme Fertilisers and Chemicals, the leading producer of urea in sub-Saharan Africa. The company, which already owns 85% of the producer, has bought the remaining 15% from UK-based Actis Capital, according to sources with knowledge of the deal. Urea is a key ingredient in agricultural fertilisers.

The privately owned and family run Indorama took over the producer in 2006, when the Nigerian government privatised it. Prior to its privatisation, it was a wholly owned subsidiary of the Nigerian National Petroleum Corporation.

Indorama’s investments led to an overhaul of the company’s operation, a return to growth and global success in what was seen as a model of success for the government’s privatisation agenda under former President Olusegun Obasanjo. The company is said to produce about 1.4m tonnes of fertiliser from its Port Harcourt plant, mainly for export to Brazil and India.

In 2016, Dubai-based private equity firm, Abraaj took a 15% stake in the company. That 15% stake was valued at the time at $150m, valuing Eleme Fertilisers and Chemicals at $1bn. Following the collapse of Abraaj, which was then the largest private equity group focusing on emerging markets, some of its assets were taken over by various private equity groups, including Actis Capital.

While the transaction is yet to be officially confirmed by the two parties, sources say that the 15% stake has been purchased at just under $500m, around three times what it had originally been sold for.

This would put the Port Harcourt-based fertiliser producer’s valuation at close to $3.3bn and make it one of the most valuable companies in sub-Saharan Africa outside of South Africa. It puts the company in the league of companies worth over a billion dollars, including Dangote, MTN Nigeria, BUA and Zenith.

The company will however not be publicly traded and will remain in the control of the Lohia family, owners of the Indorama Group. The Nigerian operation is overseen by SP Lohia, who is married to the sister of Lakshmi Mittal, chairman of ArcelorMittal, the biggest steel maker in the world.

In Nigeria the group also has another industrial business producing plastics related products such as polyester textiles, cotton fibre and medical gloves. A combined valuation of its Nigerian businesses would put it at $7bn according to analysts.

Sign of confidence

The deal goes against the grain of current global economic uncertainty and is indicative of the Indorama’s confidence in Nigeria and the region in general.

In the wake of multiple global crises, analysts are sceptical of such big money transactions in the immediate future, as investors weigh the trends across the globe.

Africa, in particular, has borne the brunt of such pessimism, with investors pulling their money from the continent, leaving several countries, including Nigeria, facing credit and currency pressures. The fact that the business is export-facing makes it less exposed to weakening exchange rates and current market turmoil.

The Indorama Group started out as Indorama Synthetics in 1975, first set up in Indonesia by M L Lohia, and his son, S P Lohia to engage in cotton yarning. In 1991, it branched out into the production of polyester fibres from petrochemical chemical derivatives, and subsequently into the production of polyethylene terephthalate resins.

Since then, the company has grown into a conglomerate with investments and holdings in Brazil, Indonesia, Uzbekistan, Malaysia and India. In Africa, its other operations are in Senegal where it produces phosphate-based fertilisers.