Temasek bids for Olam, extending sector deal spree

The unprecedented spree of deals among crop trading giants gained another leg as Temasek bid for Olam International, in a deal billed as supporting the agriculture giant's growth, but which would protect the group for Singapore too .

Temasek, Singapore's state investment agency, said that two of its divisions, Breedens and Aranda Investments, had joined with shareholders from Olam's founding family and executive committee to bid $2.1bn in cash for the 47.5% of shares in group that they do not already own.

The deal - priced at Sing$2.23 per share, an 11.8% premium over their closing prices on Monday - "will give Olam "a stronger long term shareholder base to support the company's strategy and growth plans over the medium to long term", the bidding consortium said.

"Members of our consortium are all long-term shareholders of Olam," Breedens director David Heng said.

"We have invested in Olam over the years, and share a common investment philosophy to invest and build for the long term."

The company - one of the bigger Singapore-based companies, valued at Sing$5.3bn ($4.2bn) by Friday's offer is still recovering from an attack in 2012 by short-selling fund Muddy Waters, which warned over Olam's debt levels, prompting the group to call time on an acquisition spree and focus on reducing its gearing and simplifying its business.

Deal spree

However, the offer also comes amid a spree of deals among agricultural commodity investors which has reached Singapore, with Noble said to be in talks to inject its crop trading division into a joint venture with Cofco, the Chinese state-owned grain and food giant.

That news came less than a week after Cofco bought control of Nidera, the Dutch-based grain trader, while also last month, on a small scale, Japan's Sumitomo Corp bought Australian crop handler Emerald.

Last year, Archer Daniels Midland failed in a $3.1bn bid for Australia's GrainCorp, while Marubeni closed its $2.6bn acquisition of the agriculture operations of US-based Gavilon, months after Switzerland's Glencore completed the $ purchase of Canada's Viterra.

'Chinese are on the march'

Indeed, one banker spoke to, who was not involved in the Olam deal, proposed that the deal may be motivated in part by a wish by Singapore to keep a grip on a sector which is a big industry for the city state.

"The Chinese are on the march. One would hardly be surprised if Temasek was supporting a broader strategic aim, besides an investment one," the banker said.

All three of the "Now" group of Asian agricultural trading houses Noble, Olam and Wilmar International are currently based in and listed in Singapore.

Besides Noble's talks with Cofco, Wilmar too has substantial foreign links, counting Malaysia's Kuok brothers and US-based Archer Daniels Midland as its leading shareholders.

To remain listed?

Mr Heng said that the bidding consortium would "prefer to keep Olam as a listed company, which will continue to be guided by its board and management team.

"However, we will reassess our position if the minimum public float requirements are not met at the close of the offer," with Singapore listing rules putting a 10% floor on the percentage of a company that must be freely floated.

Temasek, whose portfolio was worth Sing$215bn as of March last year, has a strategy of raising the proportion of its investments in unlisted companies.

Olam shares closed up 11.8% at Sing$2.23 in Singapore, at the offer price, and the highest close since May 2012.

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