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Olam's Mitsubishi cash injection to help acquisitions, CEO says

Friday, August 28, 2015 - 08:43
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The S$915 million cash that Mitsubishi Corp will pay for new shares of Olam International Ltd will help Singapore's commodity trader fund acquisitions, according to Chief Executive Officer Sunny Verghese.

[SINGAPORE] The S$915 million cash that Mitsubishi Corp will pay for new shares of Olam International Ltd will help Singapore's commodity trader fund acquisitions, according to Chief Executive Officer Sunny Verghese.

The rout in commodity prices and asset values is opening up opportunities for Olam to expand and the money the company will get from Japan's biggest trading house will give it firepower, Verghese said Friday in an interview with Bloomberg Television.

The Singapore firm - which ranks in the top three traders of coffee and rice - agreed to sell a 20 per cent stake to Mitsubishi in two deals worth a combined US$1.53 billion. The first will see Tokyo-based Mitsubishi buy 332.7 million new shares; in the other, Olam's founding investor, the Kewalram Chanrai Group, agreed to sell an 8 per cent stake to the Japanese company.

"It provides growth capital for Olam," Mr Verghese said. "Given current commodity market environment and the general macro, we believe this will present us with a few interesting accretive opportunities in line, and consistent, with our strategy." The new shares were priced at S$2.75 a piece, a 63 per cent premium to Olam's close on Wednesday. Olam will resume trading today after surging yesterday before it halted its shares from trading.

Mitsubishi and Olam have had a working relationship for over 20 years, Verghese said. The Japanese firm made the best bid after "multiple parties" showed interest in Olam, he said.

In June last year, Mitsubishi agreed to pay US$64 million for 80 per cent of Olam Grains Australia to give it control over a business that handles more than 1 million metric tons of grain a year. The same year, Sanyo Foods Co, a unit of Mitsubishi, agreed to purchase 25 per cent of Olam's packaged-food division.

BLOOMBERG