Olam to buy US spice maker Olde Thompson at US$950m enterprise value

OLAM International is proposing to buy US spice maker Olde Thompson from its management shareholders and private equity firm Kainos Capital at an enterprise value (EV) of US$950 million through its wholly-owned subsidiary Olam Food Ingredients (OFI).

According to Olam, the consideration implies an EV/Ebitda (earnings before interest, taxes, depreciation and amortisation) multiple - which is the enterprise value on diligence-adjusted 2020 Ebitda - of approximately 11.5 times, or about 8.5 times including expected synergies.

In a bourse filing on Thursday, the agri-food giant said the total consideration sum will be subject to net working capital adjustment at closing based on good-faith estimates provided by Olde Thompson, estimated transaction expenses, as well as a US$5 million adjustment escrow payment, among others.

For illustrative purposes, the group projects a total consideration of approximately US$727.5 million based on the unaudited FY2020 financial statements of Olde Thompson.

The proposed acquisition is expected to close in Q2 of 2021, and earnings and margin-accretive to OFI from the first year. It may also generate potential Ebitda synergies of US$20-30 million, said the group.

In its announcement, Olam said the proposed purchase will build on its recent two acquisitions in the North American spices sector, namely US-based chilli pepper business Mizkan America, and the onion ingredients business of Cascade Specialties.

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This is aligned with OFI's vision and "accelerates its growth strategy of delivering sustainable, natural, value-added food and beverage ingredients and solutions to its customers", said the group.

Highlighting OFI's spices business as an "attractive and growing part of (the unit's) overall portfolio", Olam said Olde Thompson will create a substantive growth platform for OFI to provide similar sustainable and innovative retail solutions across its other products.

The proposed deal will also enable OFI to combine its strengths in global origination and sustainable supply chains with Olde Thompson's capabilities to provide retail spice solutions to offer differentiated value to customers, it added.

"Growing our offerings of private label solutions is right at the heart of OFI's strategy - and within that spices is one of the most attractive and growing categories, especially in the US. This will enable us to offer consumers a comprehensive range of bold, authentic, natural taste and flavours with end-to-end traceability," said OFI chief executive A Shekhar.

Shares of Olam closed S$0.02 or 1.2 per cent higher at S$1.74 on Wednesday.