Cambria Africa acquires Malawi’s chem distributor C&M for £302,000

LONDON (ICIS)–South Africa-based investment fund Cambria Africa will acquire Malawi chemicals distributor Chemicals & Marketing (C&M) through its subsidiary Millchem, the fund said on Tuesday.

Cambria Africa will fund the purchase issuing 5.5m of its own shares, although this is subject to the approval of a shareholders general meeting, totalling £302,000 (€373,000) according to the shares closing price on 23 May of £0.05. Cambria’s shares are listed on the London Stock Exchange

Cambria said it expects Millchem to expand geographically and benefit from “entirely new, but proven and attractive product lines” through branches in Malawian cities of Blantyre, Lilongwe and Mzuzu.

C&M had sales of $2.5m in 2013 and earnings before interest and taxes (EBIT) of $177,000.

“Malawi represents a significant and enticing growth opportunity for Cambria and through this acquisition of C&M we are diversifying our Millchem business into another high growth jurisdiction. This is directly in line with Cambria’s strategy of building high growth, high quality regional companies,” said Edzo Wisman, CEO of Cambria.

Following the acquisition announcement, UK-based broker WH Ireland said the operation shows “Cambria is making progress expanding into the region and the opportunities for earnings enhancing acquisitions” and increased its sales forecast for 2015 and 2016 by $2m, and EBIT by $150,000.

“All expansion costs associated with rolling out into new markets will be expensed, so the Group is unlikely to be profitable, which is being compounded by the difficult economic environment in Zimbabwe. However, a jump in revenues is likely as greater traction is achieved,” said WH Ireland.

The broker kept its ‘buy’ recommendation in Cambria’s shares, which 12-month price target forecast at £0.14.