Agribusiness: Olam sells stake to Saudi Arabia’s Salic, pursues restructuring

By Estelle Maussion
Posted on Tuesday, 5 April 2022 17:15

Saudi Arabian firm Salic will acquire a stake in one of the Singaporean company's subsidiaries, Olam Agri. It comes at a time when Olam, which has a strong presence on the continent, is reorganising its activities.

Against all odds, the global agricultural commodities trading giant – which has a strong presence in Africa – is continuing with the reorganisation it launched in early 2020. Olam Agri is one of the group’s subsidiaries that was created in the context of the restructuring.

The latest step was the 25 March announcement of an agreement with Salic (Saudi Agricultural and Livestock Investment Company), a wholly-owned subsidiary of the Public Investment Fund (PIF) – a Saudi Arabian sovereign wealth fund.

The agreement will see Salic buy 35.4% of Olam Agri for $1.24bn. Expected to be completed by the end of the year, the deal – which involves the Singapore offices of Rothschild & Co and Credit Suisse on the Olam side and Goldman Sachs Saudi Arabia on the Salic side – values Olam Agri at $3.5bn.

Olam, whose majority shareholder is Singapore’s sovereign wealth fund Temasek, retains 64.6% ownership of Olam Agri.

Debt reduction

The operation should enable the Singaporean group to improve its financial performance, and in particular, to reduce its debt, prepare the future listing of Olam Agri and ensure the development of its activities in the Middle East. On the Saudi side, the alliance is part of the country’s desire to strengthen its food security.

Despite the impact of the Covid-19 pandemic and – more recently – the war in Ukraine on commodity trading, the Singaporean group, valued at $5bn dollars on the Singaporean stock exchange, achieved strong results in 2021, with a turnover of $34.5bn dollars (+31.2% year on year) and a net profit of $707m (+41.8%).

Exit from Arise

Since the beginning of the year, the group that was co-founded by Sunny Verghese – who is also the CEO – has made numerous announcements about the progress of the reorganisation of its activities. In January, it indicated that it had secured several loans worth $4bn from a pool of banks.

In February, the group made official its withdrawal from Arise – a subsidiary specialising in logistics, ports and the construction of industrial platforms – that is active particularly in Gabon and Togo. For $189m, it sold its interests in two of the subsidiary’s three entities – Arise IIP and Arise IS – to an investment fund created by members of Arise’s management and based in Abu Dhabi (Africa Transformation and Industrialisation Fund), retaining only a 32.4% minority interest in the third entity, Arise P&L.

Finally, Olam confirmed the restructuring (that came into effect on 15 March) of its activities into three subsidiaries: Olam Food Ingredients (ofi), positioned on the consumer food niche; Olam Agri, focused on the agribusiness sector; and Olam, an entity grouping non-core activities.

According to the group’s forecasts, ofi is to be the first subsidiary to be listed on the London and Singapore stock exchanges, a process scheduled for this year. The listing of Olam Food is expected to follow.

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