Olam shortlists six bourses for big IPO of food ingredients unit
CEO Sunny Verghese says Singapore is among at least six being considered
Singapore
OLAM International has short-listed six rival exchanges including the Singapore Exchange, as a potential venue of choice for the mega listing of its giant food ingredients unit sometime in the second quarter of next year, said the firm's head honcho.
"We are keeping an open mind and doing a very careful assessment... (of) many competing venues. Singapore is definitely in contention but we are looking at a few others - at least half a dozen exchanges," Olam's co-founder and group chief executive Sunny Verghese told The Business Times in an interview.
He continued: "We are very clear about the criteria. We want to list in the best market that understands and can reflect the full value of OFI (Olam Food Ingredients)". Olam, which is majority owned by Temasek Holdings, expects to make up its mind on the listing venue within six months, he said. He said the group was targeting for OFI to have a meaningful free float of 25-30 per cent.
On Friday, the agri-food giant unveiled details on its plan to rejig its bloated portfolio into two distinct entities that was first disclosed a year ago.
OFI, which supplies ingredients from cocoa, almond, coffee, dairy, spices and nuts, and turned in EBIT (earnings before interest and taxes) of S$771 million in FY2020, is slated to be listed in the second quarter of next year "immediately after" the group reports its full 2021 results around March, according to Mr Verghese.
The flotation of the other unit, Olam Global Agri (OGA) - a global food, feed and fibre agri-business which includes staples such as grains, rice and edible oils - will follow suit a year later. "We will be sought after by the exchanges for the potential listing because by most measures, the size of the IPO we are contemplating would be meaningful, significant and sizeable. And that is a good position to be in," he said.
OFI and OGA accounted for 72 and 43 per cent respectively of Olam group's EBIT of S$1.07 billion last year. In terms of group revenue of S$35.8 billion, OFI and OGA made up 35 and 60 per cent respectively.
Olam said it was evaluating a scheme of arrangement to move its listing on SGX's mainboard to a new holding company. It is intended for OFI to be demerged from the group by way of a distribution in specie of shares in OFI to Olam shareholders in conjunction with the IPO.
Mr Verghese said this "full-fledged spin-off" of OFI as opposed to an equity carve-out structure would be the same route that OGA will undertake so as to avoid the valuation dilemma of the "holdco discount" and resulting, value leakage. "We don't want that risk. We don't want to have created the value and then, that value gets eroded because of the holdco discount," he explained.
As to what extent Olam's debt totalling some S$14 billion as at end-2020 will be carved out and pushed down to OFI and OGA, Mr Verghese said: "All I can say now is that they (the two entities) will have significantly improved gearing than where we are today. So it (debt) will be pushed down very appropriately based on the invested capital and targeted capital structure - this will be benchmarked against their peers. They are also raising a lot of new capital that will drive growth."
The agri-food stalwart issued its FY2020 earnings report card on Friday which overall, painted a picture of operational resilience in a pandemic-dominated year.
A one-off, non-cash impairment charge on the group's investment in Olam Palm Gabon (OPG) led Olam to report a net loss of S$87 million in the second half period ended December from a restated profit of S$85 million a year ago. Excluding one-off exceptional items, net profit would have grown 90.1 per cent to $475.7 million. Revenue jumped nearly 10 per cent to S$18.7 billion for the half year period. Olam posted a loss per share of 3.61 Singapore cents versus an earnings per share of 1.82 Singapore cents a year ago.
For the full year, net profit fell 22.3 per cent to S$246 million on the back of a nearly 9 per cent rise in revenue to S$36 billion. Olam has recommended a final dividend of four Singapore cents per share, lower than the 4.5 Singapore cents declared a year ago. The final cash dividend is subject to shareholders' approval at its annual general meeting on April 23, with books closure on May 3. If approved, the dividend will be paid on May 10.
The group's total dividend for the year will amount to 7.5 Singapore cents per share, down from 8 cents for 2019.
