Olam gets another Temasek boost

TEMASEK is extending a protective arm around Olam. The Singapore investor is leading a group which has offered to buy the 48 per cent of the commodity trader it doesn't already own at a valuation of US$4.3 billion. The buyout should help to shield Olam from sceptical short sellers - and remove any doubts over its creditworthiness.

It's not the first time Temasek has come to Olam's aid. In December 2012, the group underwrote a US$712 million convertible bond issue designed to see off short sellers like Muddy Waters, which had challenged Olam's accounting. Yet despite Temasek's support, and a subsequent strategy overhaul designed to improve cash generation, Olam's valuation has lagged those of its listed peers.

For that reason, the consortium's S$2.23-a-share cash bid should find plenty of takers. The offer is only an 11.8 per cent premium to Olam's most recent closing price, and comes after near-40 per cent rally in recent months. But it's a price shareholders have not seen since the summer of 2012, when analysts started raising doubts about the company's soundness. Besides, there's no prospect of a rival bid.