Olam Group to sell 35% stake in Olam Agri for $1.68 billion, sees potential unit IPO

Olam Agri gets an implied valuation of US$3.5 billion through the potential deal. PHOTO: OLAM INTERNATIONAL

BENGALURU (REUTERS, BLOOMBERG) - Shares of Singapore-based commodity trader Olam Group jumped on Friday (March 25) after it announced plans to sell a 35 per cent stake in unit Olam Agri to Saudi Agricultural and Livestock Investment Company (Salic) for US$1.24 billion (S$1.68 billion), setting the path for a potential initial public offering (IPO) and demerger of the unit.

Salic is a unit of the Public Investment Fund of Saudi Arabia.

“A secondary placement for Olam Agri would lead to an immediate unlocking of value for our shareholders and set a benchmark valuation for the future IPO and demerger of Olam Agri,” Olam Group chief executive Sunny Verghese said.

Olam Agri, one of the three operating groups formed in early 2020 following the re-organisation of the Olam Group, gets an implied valuation of US$3.5 billion through the potential deal.

Olam Group will retain a 64.6 per cent holding in the unit following the sale. 

In a press conference on Friday, Mr Verghese said no special dividends are expected from the sale, as the proceeds will be channelled towards reducing the firm’s leverage.

Olam Agri operates a food, feed and fibre business in high-growth emerging markets. It deals in products such as grains and oilseeds, animal feed and protein, rice, edible oils and commodity financial services, with more than 40 million tonnes in volume traded.

Mr Verghese said the partnership with Salic will provide synergies and access to the Saudi Arabia market and the broader Middle Eastern region. This could potentially deliver a new stream of growth.

Saudi Arabia imports 75 per cent of food it needs, including 7 million tonnes of barley and 3 million tonnes of corn every year. 

“Our partnership with Olam will expand Salic’s international footprint and increase access to strategic commodities,” said Salic group CEO Sulaiman AlRumaih.

The deal, which is expected to be completed by the end of this year, is subject to shareholder approval. 

It also comes after Olam Group delayed the planned second-quarter London listing of its food ingredients unit on Thursday, citing market volatility amid the war in Ukraine. 

Olam shares jumped as much as 5.7 per cent to $1.87 when the market opened, before closing the day at $1.83. 

  • Additional reporting by The Straits Times

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