PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 17:51 UK, 2nd Jan 2014, by Agrimoney.com
Olam ditches drive to exploit Canada grain reforms

Olam International gave up on its effort to exploit liberalisation in Canadian grain marketing in the latest sign of it giving up on the worldwide expansion strategy which fostered concerns among investors.

The Singapore-based group, one of the "Now" group of Asian agricultural trading houses, with Noble Group and Wilmar International, said it had sold its 50% stake in Lansing Olam Canada, a joint venture aimed at originating and marketing Canadian grains and oilseeds.

The disposal, structured through a share repurchase which will hand Olam $5.4m, comes 18 months after the Lansing Olam Canada was set up, as a tie-up with Lansing Trade Group, a US-based commodities marketing group to "establish a foothold in the liberalised western Canadian grains market".

Canada's ags market has attracted a wave of foreign interest - for example through Swiss-based Glencore's acquisition of Viterra - since 2012 deregulation which deprived the Canadian Wheat Board of its monopoly over grains sales in the Prairies, responsible for some 90% of domestic production.

"The joint venture will leverage Olam's in-house milling demand in Africa, its rapidly growing global trading platform and customer base along with Lansing's deep knowledge of North American market," Olam said at the time.

"This will enable the joint venture to become a valuable contributor in the liberalised [Canadian] market."

Change of strategy

However, Olam has, under pressure from investors, retreated on an expansive strategy which drove it into a range of crop markets, from cashews to cocoa, in 65 countries.

The group was targeted by Muddy Waters, the short selling fund, which cautioned over a "black hole" at Olam, triggering a slide in its shares and a review of the company's performance.

KC Suresh, global head of Olam's grains business, said after Thursday's deal: "Our exit from Canada will allow us to concentrate our resources on the rest of our grains businesses in line with the company's refreshed strategy."

The disposal is the latest of a series of retreats, with Olam two weeks ago revealing plans to sell most of its 25% stake in New Zealand-based Open Country Dairy.

In November, Olam unveiled two retreats in Australia, selling its Dirranbandi gin to Cubbie Group for Aus$20m, and realising Aus$200m in cash from a sale-and-leaseback agreement for nearly 12,000 hectares of almond orchards.

Andersons tie-up

Lansing, meanwhile, has increased its exposure to Canada, in July buying Thompsons Limited, a grain handler and farm services provider based in Ontario.

The Thompsons deal was undertaken as a joint venture with The Andersons, the New York-listed rail-to-ethanol group.

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