Olam peeling away property assets of US onion and garlic processing plant

Singapore

OLAM International is selling the real estate assets of its onion and garlic processing facility in California to Chicago-based investment management firm Mesirow Financial for some US$110.3 million, as part of its six-year strategic plan.

The mainboard-listed food and agri-business has also entered into a tiered revenue sharing arrangement with Mesirow, with whom it will share a part of the annual revenue from operating the assets for a period of 25 years.

The transaction is expected to be completed in December this year, subject to customary conditions. In response to a query by The Business Times on Tuesday, an Olam spokesperson said the real estate assets refer to the "land and building" of the US plant.

On completion of the deal, Olam will receive cash proceeds of US$110.3 million, and is expected to book a one-time pre-tax capital gain of about US$97 million. Stream Capital Partners is the financial adviser to Olam in this transaction.

Said Greg Este, Olam's managing director and CEO of spices: "As a large, leading financial services firm in the US, Mesirow has been a long-term partner of many large corporations in real estate transactions, so I am confident our partnership will go a long way towards creating value for our respective stakeholders.

"I am excited about our next phase of growth as we can now redeploy part of the capital released for investments in product innovation and value-added services to create further value for our customers."

Besides this transaction, Olam noted that it is also currently engaged in discussions for divesting, and/or restructuring various assets and businesses in line with its 2019-2024 strategic plan, some of which may be concluded in this financial year. However, the financial impact arising from such divestment or investments is not yet quantifiable at this point of time, and will instead be reflected in the group's full-year financials, Olam said.

Earlier this month, the agri and food giant reported a 1.5 per cent drop in its third-quarter net profit to S$20.4 million for the three months ended Sept 30, from S$20.7 million a year ago. Earnings per share was 0.2 Singapore cent for the quarter, unchanged from the preceding year.

Looking ahead, the group will work on its strategic plan involving acquisitions and divestments. As of now, Olam has exited peanut farming, and sold its remaining 51 per cent interest in Collymongle Ginning, an Australia-based firm which processes cotton. The firm has also closed its sugar, rubber and fertiliser trading desks, as well as its wood products, and fundamental fund business in Latin America.

Olam shares closed at S$1.83 on Tuesday, up 0.55 per cent, or one Singapore cent.