Egypt's largest dairy producer, Dina Farms, was able to secure LE92 million ($15.3 million) in funding to expand its milk production capacity by a third by 2013, private equity firm, Citadel Capital (CCAP), announced on Wednesday.
Dina Farms is a portfolio company of Gozour, CCAP's agriculture and consumer foods arm. Gozour is 20 per cent owned by the private equity firm.
A statement issued by CCAP explained that the expansion plan includes purchasing 2,000 top-quality pregnant heifers from the United States to arrive in October 2012 and the third quarter of 2013. It will also include building new milking stations to accommodate the new herd. Dina Farm currently owns 6,000 milking cows.
Funding for this project comes via a LE92 million syndicated loan from Al-Ahli United Bank, Egyptian Arab Land Bank and the United Bank.
“We are currently witnessing a market that is suffering from an undersupply of milk, which has led to a recent increase in factory prices. The country as a whole needs new investment in dairy farms," Hanee Afia, CEO of Gozour’s Integrated Dairy Business was quoted as saying by CCAP.
"An increase in our dairy capacity will help to offset the imbalance and close the import gap,” he added.
The new investment is also part of a strategic shift in CCAP's investments.
"The latest developments at Gozour come on the back of CCAP starting to focus on a few core investments rather than being diversified into numerous businesses," according to a note issued by the Cairo-based investment bank on Thursday.
Last week, CCAP announced that Gozour was trying to exit its Egyptian cheese producing asset, Al-Misriyeen.
CCAP currently manages 19 Opportunity-Specific Funds that control platform companies with investments of $9.5 billion in 15 industries including energy, mining, agrifoods, cement, transportation and retail.
Beltone, however, predicted that CCAP's share valuation would not be much affected by the newly announced plans.
"[Impacts] on CCAP’s valuation are minimal, given that Gozour as a whole makes up for 6 per cent of the group’s gross asset value," Beltone said, adding that the "expansion plans at Dina Farms come as positive news in the long term."
CCAP stocks on the Egyptian exchange currently trade at around LE4.72 per share.