SINGAPORE - Olam International has sold 5,100 acres (2,100 hectares) of its farmland assets to Farmland Partners Inc (FPI), one of the largest listed farmland real estate investment trusts in the United States, for US$110 million (S$148.5 million).
Olam has also entered into a revenue sharing model with FPI under which it will pay the latter a share of the annual revenue, while it continues to operate the orchards for 25 years.
FPI is an internally managed real estate company that owns and seeks to acquire high quality farmland throughout North America.
It owns more than 300 farms with a combined size of 154,000 acres across 17 states.
"As part of our Edible Nuts strategy, we intend to further invest in growing almonds, pistachios and walnuts in California. We have built a sizable portfolio of prime orchards and have adopted sustainable and industry leading agricultural practices in managing these orchards," said Olam's managing director and chief executive of edible nuts, Mr Ashok Krishen.
"We had been looking for the right partner who sees the long-term value of farming, while we are looking for an asset light model to participate in the production economics of the tree crops.
"Farmland Partners, whose success is based on strong partnerships with farmers, is therefore a strategic fit for our business model."
FPI chairman and chief executive Paul Pittman said his team look forward to bringing Olam's properties into the group's portfolio.
"They are unique, high quality farms in the heart of California's tree nut industry. The properties and associated agreements will bring higher-return permanent crop production into our portfolio furthering our goal of delivering a well-balanced portfolio of US farmland to our stockholders," he noted.
Subject to the conclusion of FPI's debt raising and other customary conditions, the transaction is expected to be completed by end-November 2017.
Upon completion of the transaction, Olam will receive US$110 million cash and reduce its invested capital, thereby improving its return on invested capital.
Olam shares today ended one cent higher at S$2.01.