James Emejo in Abuja and Dike Onwuamaeze in Lagos
Saudi Agriculture and Livestock Investment Company (SALIC) is set to acquire 44.58 per cent stake in Olam Agri for $1.78 billion in the first tranche of the deal.
The agreement announced in a joint statement, added that upon completion of tranche 1, SALIC would own a controlling 80.01 percent stake in Olam Agri.
Singapore’s Olam Group Limited would upon the completion of the sale of Tranche 1, have a put option’ to sell its remaining 19.99 percent stake in Olam Agri to SALIC in the second tranche which is exercisable on the third anniversary of completion of the sale of Tranche 1 at the Closing Valuation plus six per cent IRR.
SALIC would upon the completion of the sale of tranche 1, have a call option to buy the 19.99 per cent stake in Olam Agri on or before the third anniversary of the completion of the sale of Tranche 1.
The implied 100 per cent equity valuation for Olam Agri of $4 billion is 23 percent higher than the $3.25 billion market capitalisation of Olam Group Limited (OGL), which currently consists of Olam Agri, ofl and the remaining Olam Group.
The 100 per cent equity valuation of $4 billion reflects a 14 per cent premium to the $3.50 billion valuation at which SALIC first acquired a 35.43 per cent stake in Olam Agri in December 2022, which closed at a total final consideration of $1.29 billion (inclusive of post-closing adjustments in H1 2023).
The statement added that the valuation also represented a 3.47x price-to-book value multiple to Olam Agri’s book value of $1.15 billion as at December 31, 2023.
Furthermore, on completion of the sale of tranche 1, OGL would realise an estimated gain on disposal of $1.84 billion which will accrete to the equity reserves of OGL5.
OGL would raise estimated total gross cash proceeds of $2.58 billion from the sale of tranche 1 and 2.
The OGL Board would also take into consideration various factors including the level of the Group’s future earnings, cash flows, capital requirements for maintenance and growth, other financial and general business conditions before making any decision on the use of the proceeds which may include debt repayment, right-sizing the capital structure of OGL and ofi, as well as the provision of a possible one-time special dividend distribution.
According to Olam, the transformative deal represented a significant value realisation for OGL shareholders: OGL’s divestment of a 100 [er cent interest in Olam Agri at the end of tranche 2, including the initial sale of 35.43 per cent stake in 2022, would raise total gross proceeds of $3.87 billion accreting a total gain of $2.72 billion to the equity reserves of the group.
OGL continues to hold a 100 percent interest in ofl and the Remaining Olam Group, and would now focus on seeking strategic options to unlock value for the Remaining Olam Group businesses and ofi, including the pursuit of an ofi IPO.
The deal aligns with SALIC’s strategic investment approach, which prioritises high-potential companies addressing future food security needs through innovation and integrated supply chains both locally and globally, and remains confident that the partnership would contribute to achieving national and global objectives.
Commenting on the deal, OGL’s Co-founder and Group Chief Executive, Sunny Verghese said, “Since SALIC’s investment in Olam Agri în 2022, our partnership with SALIC has unveiled new avenues of growth. With its strategic mandate as a global agrifoods investor and related complementary strengths, SALIC and Olam Agri share the same vision and focus on sustainable sourcing and commitment to meet the rising demand for food, feed and fibre.
“Importantly, this transaction is transformative for Olam Agri. The sale of Olam Agri to SALIC marks another key milestone in Olam’s re-organisation journey announced in January 2020. With this transaction, we can now focus our attention on seeking strategic options to unlock value for the Remaining Olam Group businesses and ofi, including the pursuit of an ofi IPO.”
Also, the Group Chief Executive, SALIC, Sulaiman AlRumaih said, “The full acquisition agreement of Olam Agri aligns with SALIC’s strategic objectives of diversifying sources of essential commodities, strengthening supply chain integration, and enhancing logistical efficiency across its local and International investments.
“Furthermore, this acquisition underscores SALIC’s ambition to secure a key position in the global grains sector.
“Olam Agri, a global player in trading essential while continually enhancing production in efficiency for the benefit of all stakeholders.”
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