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Olam International, the agribusiness company owned by Temasek, Singapore’s state investment company, has agreed to buy the wheat milling and pasta manufacturing businesses of Bua Group, a leading foods and infrastructure company in Nigeria. The deal is worth $275 million (N54.7 billion).

In a statement released on Monday, Olam said it has acquired Bua Group’s Amber Foods Limited, owners of two wheat mills and a pasta manufacturing plant in Lagos, a non-operating mill in Kano, and a wheat and pasta manufacturing plant under construction in Port Harcourt.

The acquisition will double Olam’s wheat milling capacity in Nigeria from 2,380 metric tonnes per day to 6,140 metric tonnes per day once the facilities in Port Harcourt are completed in June 2016. Olam’s total wheat milling capacity in Sub-Saharan Africa will also double to about 7,640 metric tonnes per day, the statement said.

“Nigeria is a high growth milling market with volumes expected to reach five million metric tonnes in 2020 as population and urbanization increase the demand for wheat-based products,” said K. C. Suresh, the Managing Director of Olam Grains. “The size of the Nigerian flour market is in excess of $2 billion, growing at 3.5 percent per year while the pasta market is growing at the rate of 8 percent per year.”

In 2010, Olam became one of the largest wheat millers in Nigeria after it completed the acquisition of Crown Flour Mills (CFM) Limited for $107.6 million. Olam expanded CFM’s wheat milling capacity in 2013 and set milling operations in Ghana, Senegal, and Cameroon. With acquisition of Bua Group’s wheat and pasta mills, Olam has become the second largest wheat milling and pasta manufacturing company in Nigeria, the statement said.

Other major wheat mills and pasta manufacturers in Nigeria are: Flour Mills of Nigeria Plc; Tiger Brand Consumer Goods Plc (formerly Dangote Flour Mills); and Honeywell Flour Mills Plc.

“We are confident about the growth prospects in Nigeria,” said Mukul Mathur, Country Manager for Olam Nigeria. “So expanding our participation here is a logical step to capitalize on the opportunity. Our value-added export business in the country puts us in a strong position to manage forex availability.”

Olam International began its global agricultural commodities trading business in Nigeria in 1989 and has invested over $1 billion in the country’s agriculture sector in the last ten years.

The company is at the forefront of Nigeria’s plans to become self-sufficient in rice production by 2018. In 2013, the company invested N19 billion in a 10,000-hectare rice farm in Nasarawa State to produce 36,000 metric tonnes of rice for the Nigerian market under Mama’s Pride and Mama’s Choice brands.

Olam is the largest agricultural export company in Nigeria, dealing in the export of cocoa, cashew, sesame, and cotton. The company also owns OK Foods Limited, a biscuit and confectionary maker; Olam Sanyo, a noodles maker; Caraway Foods, makers of culinary ingredients; Ranona Nigeria Limited, makers of breakfast cereals, juices and beverages.

Chibuike Oguh is Financial Nigeria's Frontier Markets Analyst