With the help of the Singaporean wealth fund, Temasek, Olam International has cut its spending by 50% in 2014 compared to the year before, and has set a goal of a debt to equity ratio of two or below by year end 2016. Last month, in December 2014, a healthier Olam announced its largest deal to date – the acquisition of Archer Daniels Midland’s (ADM) cocoa business for $1.3 billion making it the world’s third largest cocoa processor behind Cargill and Barry Callebaut. With the support of Temasek, which increased its share in Olam in the first half of 2013 from 16% to 23%, and made a cash offer in March 2014 valuing Olam at $4.2 billion, Olam secured a $2.2 billion 364-day facility from 12 lenders to reduce its cost of borrowing, and is furthering its expansion in Southeast Asia. The group is planning to develop the coffee industry in Laos through the construction of a 3,000 hectare greenfield coffee plantation and expanding its coffee trading presence in the country. Olam is also investing $61 million to construct a cocoa processing facility in Indonesia which will source its cocoa from Olam’s network of 32,000 cocoa farmers in the country, will have an initial capacity to process 60,000 tons of cocoa per year, and which is scheduled to begin operations in early 2016. Olam’s shares have increased 35% since January 2014, however because of its ADM cocoa deal, the group’s debt ratio is back up to 2.14 times from 1.85 times, and the company will not meet its goal of becoming cash positive this year.
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