Singapore headquartered commodity trader Olam International Ltd, majority owned by state fund fund Temasek Holdings, said it has reached a deal to sell 20% stake to Japan’s Mitsubishi Corp for S$1.53 billion ($1.09 billion).
The transaction will involve two separate deals.
Olam will issue 332.73 million new shares to Mitsubishi Corporation (MC) at S$2.75 per share, representing about 12.0% of the enlarged issued and paid-up share capital (excluding treasury shares) for S$915.0 million.MC will also buy 222 million secondary shares from the Kewalram Chanrai Group, representing 8.0% of the enlarged issued and paid-up share capital.
On completion of both these transactions, MC will become Olam’s second largest shareholder with a 20.0% shareholding in it.
The Kewalram Chanrai Group had founded Olam in Nigeria in 1989.
Post the deal, Temasek Holdings will remain Olam’s majority shareholder with a 51.4% holdings in it.
The deal price of S$2.75 per share represents a 29.3% premium over the weighted average share price for the 12 months and also exceeds the highest closing price during this period. Olam said the price was determined through a competitive bidding process, but did not reveal the names of the other bidders.
The Singapore based commodities trader said the deal sets a strong platform for a long term strategic partnership between both companies several mutually beneficial potential collaboration opportunities, including the setting up of a proposed joint venture in Japan to market specific products of Olam that can leverage MC’s strong distribution and retail presence.
“The partnership is based on a common view held by Olam and MC about the long term attractiveness of the food & agriculture sector. Both Olam and MC have a strategy of selectively integrating across the value chain in order to generate attractive returns and build long-term intrinsic value. To this end, MC and Olam will also explore potential strategic collaboration opportunities that could cover several of Olam’s key platforms including for example, Grains, Edible Nuts, Cocoa, Coffee, Packaged Foods and Rice,” the company added in a statement.
Last year, Singapore state fund Temasek had offered to take over Olam in a deal that valued the agri-business operating firm at at S$5.3 billion ($4.2 billion).
Olam’s Co-founder, Group Managing Director and CEO, Sunny Verghese said: “I am pleased to welcome Mitsubishi Corporation as a long-term strategic shareholder in Olam. We have been business partners for many years and share a lot of the same goals and beliefs about the future of our sector and the attractive long term prospects that it offers. I am confident that this partnership with Mitsubishi will provide several sources of synergy which will help accelerate Olam’s growth and harness its full potential.”
The Group CEO of MC’s Living Essentials Group, Takehiko Kakiuchi said: “Today is a memorable day for the partnership between Olam and Mitsubishi. In addition to raw materials procurement and product manufacturing in the Japanese market, Mitsubishi has been developing a vertically integrated model in distribution and retail. Combining our processing, manufacturing and downstream business experience with Olam’s extensive sustainable raw material supply platforms, we will transform the business into a globally sustainable model, both in qualitative and quantitative terms, while we build a value chain that is closely connected to the needs of customers.”
Olam’s Executive Director of Finance and Business Development, A. Shekhar, said: “This transaction is consistent with the objectives of the successful voluntary general offer that was concluded in May 2014 where we sought to change our shareholder profile and attract more long-term shareholders to our register.
“We see Mitsubishi as a strategic investor who is well aligned to our long-term growth strategy. This transaction will allow us to pursue selective value accretive investment opportunities that are presented by the current macro-economic uncertainty and depressed commodity market conditions.”
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The deal price of S$2.75 per share represents a 29.3% premium over the weighted average share price for the 12 months and also exceeds the highest closing price during this period. Olam said the price was determined through a competitive bidding process, but did not reveal the names of the other bidders.