Olam Group’s wholly-owned subsidiary Olam Holdings has formed a strategic partnership with Saudi Agriculture and Livestock Investment Company (SALIC) with the sale of an estimated 35.4% substantial minority stake in Olam Agri Holdings for US$1.24 billion ($1.7 billion).
SALIC is a wholly-owned subsidiary of the Public Investment Fund of the Kingdom of Saudi Arabia. The transaction values Olam Agri at an equity valuation of US$3.5 billion.
The net proceeds from the transaction would be used to repay debt at the group level, thereby right-sizing its capital structure and reducing leverage, the company said in a statement.
Assuming the transaction was completed on Dec 31, 2021, the company’s net gearing would reduce from 1.72x to 1.28x, it added.
Post-transaction, Olam Group would remain the majority shareholder of Olam Agri with an estimated 64.6% stake, realising net capital gains of $1.19 billion which will accrete to the group’s net capital gains.
According to the company, the transaction generates synergies and catalyses access to new markets for Olam Agri through a long-term Strategic Supply and Cooperation Agreement with SALIC.
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“Olam’s partnership with SALIC, a strategic, global investor, will position us for even stronger growth as we realise synergies across our complementary strengths. SALIC’s investment into Olam Agri attests to its consistently strong financial performance and robust growth outlook, following a record year in 2021,” said Olam co-founder and group CEO Sunny Verghese.
He adds that the secondary placement for Olam Agri would lead to an immediate unlocking of value for its shareholders, setting a benchmark valuation for the future IPO and demerger of Olam Agri.
Subject to conditions including Olam shareholders’ approval, the transaction is expected to complete by end-2022.
Shares in Olam closed 10 cents lower or 5.35% down at $1.77 on March 24.
