Olam to inject US$500 million into ofi, liquidate remaining assets over time

[SINGAPORE] Olam Group will invest US$500 million equity into Olam Food Ingredients (ofi) within the next three months, while de-leveraging the remaining Olam group for progressive liquidation, as part of its reorganisation plan amid the disposal of Olam Agri.

The US$500 million investment, funded by internal resources, is aimed to “position ofi to pursue profitable growth” so that Olam can resume the delayed ofi initial public offering (IPO) plans in both Europe and Singapore, said Olam’s chief executive officer Sunny Verghese in a press conference on Monday (Apr 14).

The agri-business giant, which announced the divestment plan of one of the two profit-making units – Olam Agri – in February, is also open to private routes to unlock value from ofi.

Verghese said: “At this point of time… our plan is to make sure that we are able to raise capital in ofi first, then pursue other strategic options, including concurrent listing of ofi in Europe and in Singapore, while we also keep a room open for other private options.”

He added that Olam would continue pivoting ofi towards value-added ingredients and the food-solutions business from global commodity sourcing, as its priority in the value-creation plan for the unit.

Meanwhile, Olam will re-initiate share buybacks under its current mandate, which will be sought for renewal in the company’s annual general meeting on Apr 25.

Monetising remaining Olam group

Olam will allocate about US$2 billion to de-leverage the balance sheet of the remaining Olam group, one of the three operating groups carved out in a restructuring completed in 2022.  

After making the unit debt-free and self-sustainable, Olam will “responsibly divest” all its assets and businesses over time, and distribute the net proceeds to shareholders via special dividends.

The proceeds from the disposal of Olam Agri, estimated at US$2.6 billion gross, will finance the plan.

However, Verghese noted that it is hard to predict either the timeline or target valuation of the divestment of the 10 assets and businesses under the remaining Olam group.

“But what we want to clarify is that there will be no fire sale of these assets… we have already initiated a process of finding the right long-term owners of these businesses,” he added.

As at end-2024, the remaining Olam group had about US$2 billion in invested capital. “We expect to get the fair value from these businesses after we have restructured the business and made that entire business debt-free,” noted Verghese.

On what would happen to the listed parent company once the remaining Olam group is divested and ofi is public separately, Verghese said that Olam will give updates as the situation progresses, given the limited predictability.

“It is a function of a lot of factors, some of which are in our control, a lot of which are not in our control… when there is any material development, we will keep you informed,” he noted.

Shares of Olam jumped 6.5 per cent, or S$0.055, to S$0.905 on a cum dividend basis as at 2 pm on Monday.