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Tiger Brands in Talks With Dangote Industries on Flour Mills

May 7 (Bloomberg) -- Tiger Brands Ltd., South Africa’s largest food company, said it’s in talks with Dangote Industries Ltd. regarding the Nigerian company’s shareholding in Dangote Flour Mills Plc. Dangote Flour shares rose for a fourth day.

Tiger Brands didn’t give details of the negotiations in a statement distributed by the Stock Exchange News Service today. The Johannesburg-based company urged investors to exercise caution when dealing in its stock until a further announcement is made.

The company needs to find a new market for growth as it has become too big for its home territory of South Africa, said Wayne McCurrie, a portfolio manager at Momentum Asset Management, said by mobile phone today. Momentum is a unit of Momentum Investments which has more than 320 billion rand ($41 billion) in assets under management.

“They need a market outside South Africa and Nigeria offers exactly that,” McCurrie said.

Tiger Brands spent 2.1 billion rand buying stakes in companies outside South Africa in the 12 months through September, including UAC Foods Plc in Nigeria, sub-Saharan Africa’s most-populous nation and the continent’s second-largest economy. In April 2011, it acquired all the shares in biscuit maker Deli Foods Nigeria Ltd. and this year promoted Thabi Segoale, the managing executive of its grain division, to head the Nigerian business.

Dangote Flour climbed 4.6 percent to 4.96 naira by the 2:30 p.m. close in Lagos, extending its gains over the past four days to 16 percent. Tiger Brands was trading at 287.01 rand at the 5 p.m. close in Johannesburg, down 1 percent on the day, giving it a market value of 54.7 billion rand.

Aliko Dangote, president of Dangote Group, would want to sell Dangote Flour to focus on cement and infrastructure, “which is more lucrative than food business,” Adedoyin Adelakun, a Lagos-based analyst at Vetiva Capital Management, said by phone today.

Dangote Flour said on Jan. 5 that profit will probably rise 78 percent in the fourth quarter of its 2011 fiscal year. its results have been due for release since March.

To contact the reporters on this story: Sikonathi Mantshantsha in Johannesburg at smantshantsh@bloomberg.net; Vincent Nwanma in Lagos at vnwanma@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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