March 29, 2022

By Lynda Kiernan-Stone, Global AgInvesting Media

The Saudi Agricultural and Livestock Investment Company (SALIC), a wholly owned subsidiary of Public Investment Fund of the Kingdom of Saudi Arabia, has acquired a 34.5 percent stake in Olam Agri, a wholly owned subsidiary of Olam Group Limited (OGL) focusing on the trade and processing of grains, oilseeds, rice, and animal feed, for $1.24 billion. 

Olam Agri is one of three operating groups formed by Olam in 2020 following an announced reorganization undertaken to unlock long-term value. Operating under its mission to “transform food, feed, and fiber for a more sustainable future”, Olam Agri targets high-growth consumption markets leveraging its global origination capabilities, trading and marketing footprint, best-in-class logistics, and risk management expertise. 

This deal places a value of $3.5 billion on Olam Agri, which has already had a record year generating volumes in excess of 40 million metric tons, revenues of $31.3 billion, and earnings before interest and tax of $752.9 million.

“Olam’s partnership with SALIC, a strategic, global investor, will position us for even stronger growth as we realize synergies across our complementary strengths,” said Sunny Verghese, co-founder and CEO, OGL. “SALIC’s investment into Olam Agri attests to its consistently strong financial performance and robust growth outlook, following a record year in 2021.”

Verghese went on to say, “It marks yet another key milestone in Olam’s Re-organisation journey; together with the ongoing IPO plans of OFI, this secondary placement for Olam Agri would lead to an immediate unlocking of value for our shareholders, set a benchmark valuation for the future IPO and demerger of Olam Agri, and right-size our balance sheet and reduce gearing at the Group level.” 

OGL, which will remain the majority shareholder of Olam Agri with an estimated stake of 64.6 percent, stated that this divestment will prove to be transformative for the group across four considerations:

~ It unlocks value with an equity valuation equal to approximately 69 percent of OGL’s market capitalization.

~ The valuation of $3.5 billion and the partnership with SALIC validates future prospects for Olam Agri. 

~ It raises significant capital to repay debt at the OG Group level and corrects the capital structure of the OG Group thereby strengthening its balance sheet, improving its credit profile, and creating greater financial flexibility to better capitalize upon future opportunities. 

~ It generates synergies between Olam Agri and SALIC, giving Olam Agri access to new Middle Eastern markets through a long-term strategic supply and cooperation agreement with SALIC. This in-turn supports SALIC in helping Saudi Arabia to advance its food security agenda. 

“SALIC’s investment in Olam Agri is aligned with its strategy and the Kingdom of Saudi Arabia’s Vision 2030 objective for food security,” said Sulaiman Al Rumaih, CEO, SALIC. “SALIC’s key strategic objective is to contribute to global and domestic food security through long-term strategic investments in the local and international markets.”

Al Rumaih explained how the acquisition of Olam Agri will forward its strategic development of a strong, well-positioned international presence in the food value chain. 

“Our partnership with Olam will expand SALIC’s international footprint and increase access to strategic commodities,” continued Al Rumaih. “SALIC will leverage its international investments and local portfolio companies to strengthen its position across the agri-food value chain as a global food security player.”

The completion of this deal is contingent upon approval by OGL’s shareholders (however, it has been noted that Temasek, OGL’s majority shareholder, has signaled its vote of approval) and other customary closing conditions, including regulatory approval. Given the meeting of these requirements, the transaction is expected to close by the end of this year.

– Lynda Kiernan-Stone is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Oilseed & Grain News. She can be reached at lkiernan-stone@globalaginvesting.com. 

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