(Bloomberg) — Singapore’s Olam Group Ltd. reached a long-awaited deal to sell a controlling stake in its agri-business unit, which trades bulk grains and makes everything from edible oils to pasta, to Saudi Arabia’s state-owned food trading firm.
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The $1.78 billion deal will almost double the stake that Saudi Agricultural & Livestock Investment Co., or Salic, has in Olam Agri Holdings to 80%, and see Olam become a more slimmed down company focused on cocoa and coffee, where it’s one of the world’s top traders. It’s also the latest example of the kingdom’s strategy of ensuring food security through acquisitions in the global supply chain.
Olam founder and Chief Executive Officer Sunny Verghese said in a statement that it marked a key milestone in the restructuring of the company, which started in 2020 with the aim of splitting the group’s assets and listing them separately. Olam Agri would be publicly listed at an appropriate time, he said in a briefing in Singapore on Monday.
“We hope it could be as early as possible,” Verghese said at the briefing, adding that it would depend on Salic’s decision and a possible capital injection from the new owner. “Saudi Arabia is a very capitalized market with substantial liquidity. Many food and agri businesses are listed there.”
The deal values Olam Agri at $4 billion, 23% higher than the current market capitalization of the group, the Singaporean company said. The group’s shares closed up more than 5% in Singapore at $1.19 apiece.
The unit was created in a rejig of Olam’s structure in 2020, and the company had previously pursued initial public offerings for it in both Singapore and Saudi Arabia. Regulatory bottlenecks delayed those plans, however, and in early 2022, Olam Group agreed to sell around a third to Salic, in a transaction that priced it at around $3.5 billion.
Olam could now focus its attention “on seeking strategic options to unlock value for the remaining Olam Group businesses” and the food ingredients part of the company that handles cocoa and coffee trading, Verghese said. The ingredients unit, known as ofi, was created in 2020 and has been planning a primary listing on the London Stock Exchange.
The sale reflects Saudi Arabia’s increasing ambition in commodities beyond oil. The kingdom has been making efforts to lower its reliance on the petroleum sector and increase self-sufficiency and security of supply in areas like food and metals.
