Olam splits businesses into 2 groups with eye to list them

Singapore

AGRI-FOOD giant Olam International is reorganising its businesses into two new operating groups with plans to list them.

The first division, Olam Food Ingredients (OFI), will consist of Olam's cocoa, coffee, edible nuts, spices and dairy businesses. It will be led by A Shekhar who has been appointed OFI's chief executive officer (CEO) and will step down from his current role as Olam's chief operating officer with immediate effect.

Olam Global Agri (OGA), on the other hand, will comprise the group's grains and animal feed, edible oils, rice, cotton and commodity financial services businesses. Sunny Verghese will helm OGA as its CEO, in addition to his current role as Olam's CEO.

As the parent company, Olam will provide shared services to OFI and OGA and continue to develop businesses.

The group did not disclose the current valuations of its new business segments. Olam is still valued as a whole, which includes OFI and OGA, Mr Shekhar said at a press conference on Monday. The valuations are expected to be revealed when the group announces its half-year results in August.

The reorganisation, recommended by Olam's two financial advisors, Credit Suisse and Rothschild, is said to be aimed at simplifying its businesses in order to sharpen its focus.

"We believe this will enable us to explore potential carve-outs and IPOs (initial public offerings) in a sequential manner and attract additional investors who are aligned with the vision of these two new groups in order to maximise the value of our business," Mr Verghese said in a press statement, adding that the listing of either of the groups could take 18 to 36 months.

When asked whether the privatisation of Olam will be on the cards should the IPOs come through, Mr Verghese replied that the question should be directed at shareholders. In response to another query on potential changes to shareholding structure post-IPO, Mr Verghese said he hopes Olam's long-term shareholders will continue to be shareholders.

"As a whole we feel very confident that we will receive the full backing and support of shareholders," he said.

The reorganisation serves to build on its existing 2019 to 2024 strategic plan, which involves investing US$3.5 billion in priority areas such as coffee, cocoa, edible nuts, cotton and spices.

Olam has since invested some US$900 million of its US$3.5 billion target. The investments include the US$90 million acquisition of Indonesia's BT Cocoa and the US$331 million purchase of Nigeria's Dangote Flour Mills.

Olam has also exited several businesses including rubber, sugar and wood products to recycle around US$700 million of its US$1.6 billion target to fund growth.

The food trader's strategic plan comes after the 2014 takeover by Temasek Holdings when it came under attack from US short seller Muddy Waters for its accounting practices.

Temasek ended up with a controlling stake of around 54 per cent of the company; Japanese trading house Mitsubishi Corp picked up 17 per cent of Olam a year later to emerge as its second-biggest stakeholder.

Olam's shares gained some 2.1 per cent following the pre-market opening announcement on Monday and closed flat at S$1.94.