A unit of Singapore’s state-owned investment company offered to take over Olam International Ltd. in a deal that values one of the world’s top three coffee and rice traders at S$5.3 billion ($4.2 billion), reports Bloomberg.
The bid by Temasek Holdings Pte’s unit reflects growing interest in agricultural assets as rising global populations and emerging middle classes boost food demand. Breedens Investments Pte is offering S$2.23 cash per share, a 12 percent premium to Olam’s closing price of S$1.995 before the bid.
The deal comes after China’s Cofco Corp. agreed last month to take control of Dutch grain trader Nidera BV, and as Noble Group Ltd. is in talks to form a joint venture around its agriculture unit with Cofco. Temasek became Olam’s biggest shareholder after concerns raised by short-seller Carson Block in November 2012 caused the stock to plummet.
“Temasek is already a large holder of Olam so they probably know the business better than everybody else,” said Robert Aspin, the Singapore-based head of equity investment strategy at Standard Chartered Plc. “The fact that they are willing to pay a premium is indicative of the value that they see in the underlying business.”
Olam gained 12 percent to S$2.23 in Singapore on Friday, as it resumed trading after the stock was halted on Thursday. Trading volume on March 12 was 16.2 million shares, or 3.6 times the average daily volume in the previous three months, according to data compiled by Bloomberg.
Little known to retail consumers, one of every eight chocolate bars eaten globally is made from beans handled by Olam, while the trader produces enough cotton to provide all the world with three pairs of socks each year. The quantity of rice it handles annually could feed all of Africa for a week.
Olam was established in 1989 in Nigeria by the Kewalram Chanrai Group, according to its website. It now supplies products from 16 platforms to 13,600 customers in 65 countries.
As part of the transaction, Breedens is also making an offer for Olam’s outstanding convertible bonds due 2016 and warrants, it said in a statement on Friday.
The Temasek unit also has an agreement with a group including Kewalram Singapore Ltd., Olam’s founding family shareholder, and 10 Olam executives including chief executive officer Sunny Verghese, to not tender their shares until six months after the offer closes, Breedens said in a statement. In total, they hold 52.5 percent of Olam stock.
Kewalram and three members of key management have agreed to sell a 5.6 percent stake in Olam in acceptance of the offer.
Credit Suisse Group AG, DBS Group Holdings Ltd., and United Overseas Bank Ltd. advised Breedens.
Olam, which also trades commodities from cotton to almonds, has rallied 30 percent this year in Singapore through to March 12, compared with a 2.2 percent decline in the benchmark Straits Times Index. The stock has gained for seven straight weeks amid a rise in farm commodity prices. The S&P GSCI Agricultural Index has advanced 13 percent this year, with price surges in coffee and cocoa.
