SINGAPORE — Mitsubishi Corporation (MC) will purchase a 20% stake in Olam International in two separate deals announced on Aug. 27, with a value of at least S$1.34 billion ($956.3 million).
Olam said it proposes to raise additional equity capital by issuing an aggregate of S$332.73 million ($237 million) new ordinary shares to MC at an issue price of S$2.75 ($1.96) per share to raise gross proceeds of approximately S$915 million ($653 million). The shares represent approximately 12% of the enlarged issued and paid up share capital (excluding treasury shares) of the company immediately after completion of the subscription agreement.
In a separate and independent transaction, MC said it will also acquire approximately 222 million secondary shares from the Kewalram Chanrai Group, representing approximately 8% of the enlarged issued and paid-up share capital (excluding treasury shares) of Olam immediately following the issuance of such new shares. On completion of both these transactions, MC will become Olam’s second largest shareholder with a 20% shareholding in the company.
Temasek Holdings will remain Olam’s majority shareholder with a 51.4% controlling stake in the enlarged issued and paid-up share capital (excluding treasury shares) of the company upon completion of the subscription agreement.
Mitsubishi has interests including consumer goods, automobiles and food. A stake in Olam, a leading trader of agricultural commodities such as cocoa and almonds, will lift the Japanese firm’s profile as a global player in the food industry.
The issue price of S$2.75 ($1.96) per share represents a 29.3% premium over the weighted average share price for the 12 months preceding the date of the subscription agreement. The issue price also exceeds the highest closing price in the preceding one year period before the transaction announcement date. The issue price was determined through a competitive bidding process.
“This transaction is consistent with the objectives of the successful voluntary general offer that was concluded in May 2014 where we sought to change our shareholder profile and attract more long-term shareholders to our register,” said A. Shekhar, Olam’s executive director of finance and business development. “We see Mitsubishi as a strategic investor who is well aligned to our long-term growth strategy. This transaction will allow us to pursue selective value accretive investment opportunities that are presented by the current macro-economic uncertainty and depressed commodity market conditions.”
This transaction sets a strong platform for a long term strategic partnership between Olam and MC, with several mutually beneficial potential collaboration opportunities, including the setting up of a proposed joint venture in Japan to market specific products of Olam that can leverage MC’s strong distribution and retail presence and Olam’s deep origination expertise in those products Olam said.
The partnership is based on a common view held by Olam and MC about the long term attractiveness of the food and agriculture sector, Olam said. Both Olam and MC have a strategy of selectively integrating across the value chain in order to generate attractive returns and build long-term intrinsic value. To this end, MC and Olam will also explore potential strategic collaboration opportunities that could cover several of Olam’s key platforms including grains, edible nuts, cocoa, coffee, packaged foods and rice the company said.
MC will nominate up to two members to the Olam board and will also have its members join Olam’s global management team.