Olam Group will sell an around 35.4 percent take in Olam Agri to Saudi Agricultural and Livestock Investment Co. (SALIC), which is wholly owned by the Public Investment Fund of the Kingdom of Saudi Arabia (KSA), for US$1.24 billion, the agri-business group said in a filing to SGX Friday.
“This transformative deal illuminates and unlocks value in Olam Agri and crystallises a benchmark valuation ahead of a potential future IPO and demerger,” the group said, noting the implied value for all of Olam Agri is US$3.5 billion.
Olam Group will hold 64.6 percent of Olam Agri after the deal is completed, the filing said.
Potential additional stake sale
Olam said it is also exploring selling another 10 percent of Olam Agri, which could increase the proceeds of both transactions to US$1.59 billion.
The SALIC deal includes a strategic supply and cooperation agreement between Olam Agri and SALIC, the filing said, noting Saudi Arabia imports around 75 percent of its food for its population of around 34.8 million. The cooperation would give Olam Agri “significant access” to a large, high-growth Middle Eastern market, the filing said.
Sunny Verghese, Olam Group’s co-founder and group CEO, said the tie-up with the strategic global investor will position the company for stronger growth.
“SALIC’s investment into Olam Agri attests to its consistently strong financial performance and robust growth outlook, following a record year in 2021. It marks yet another key milestone in Olam’s re-organisation journey,” Verghese said in the statement.
Valuation for future IPO
“Together with the ongoing IPO plans of ofi, this secondary placement for Olam Agri would lead to an immediate unlocking of value for our shareholders, set a benchmark valuation for the future IPO and demerger of Olam Agri, and right-size our balance sheet and reduce gearing at the group level,” Verghese said.
Olam has re-organised into three operating groups: Olam Agri, Olam Food Ingredients (OFI) and the remaining Olam group, which includes gestating businesses, Olam Ventures’ businesses and Olam Technology and Business Services.
Olam Agri is an agribusiness focused on origination, trading and marketing, as well as logistics and processing, the filing said, noting it posted a 2021 earnings before interest and tax (EBIT) of S$752.9 million. Its businesses include grains, integrated feeds and proteins, edible oils, rice, specialty grains and seed, cotton, wood products, rubber and commodity financial services.
Sulaiman AlRumaih, group CEO of SALIC, said the investment was in line with the Kingdom of Saudi Arabia’s objectives for food security.
Saudi food security
“SALIC’s key strategic objective is to contribute to global and domestic food security through long-term strategic investments in the local and international markets,” he said in the statement, pointing to Olam’s presence in the grains and diversified products segments. “Our partnership with Olam will expand SALIC’s international footprint and increase access to strategic commodities.”
SALIC has identified 12 key food commodities of strategic importance, six of which Olam Agri has a presence in: Wheat, barley, rice, corn, soybeans and edible oils, the filing said.
The deal is conditional upon approval by Olam Group’s shareholders, the filing said, noting majority shareholder, Singapore state-owned investment company Temasek Holdings, has already agreed to vote in favour of the deal.
The transaction is expected to be completed by the end of this year, Olam said.