Under terms of the joint venture, Mitr Phol, which is Asia’s largest and the world’s fourth largest sugar producer, will invest $100 million to acquire a 50% stake in Far East Agri, a wholly-owned subsidiary of Olam. Olam will retain a 50% stake in Far East Agri, which operates a sugar refinery in Indonesia.
Additionally, the companies have agreed to explore the development of a greenfield sugar milling facility in East Java. Once completed in 2020, the new sugar milling facility will source 1.2 million tonnes of cane from farmers, Olam said.
“Our potential expansion into sugar milling will transform our overall participation in Indonesia’s sugar industry, which offers attractive investment and return opportunities due to its growing demand and persistent supply deficit,” said Joe Kenny, managing director and chief executive officer for sugar and dairy at Olam. “Mitr Phol is a natural partner given our shared vision and complementary strengths. Their strong sugar milling expertise coupled with our farm gate, sourcing and manufacturing capabilities will enable us to cater to the growing demand for sugar in Indonesia.”
In addition to the joint venture, Mitr Phol will join Olam’s program of extending Good Agricultural Practices to farmers across Indonesia.
Olam International is a leading agri-business operating across the value chain in 70 countries, supplying various products across 18 platforms to 23,000 customers worldwide.
Mitr Phol Sugar Corp. operates 16 sugar mills, eight power plants and four ethanol distilleries, contracting 143,000 farmers across Thailand, Laos, China and Australia. It is also Asia’s largest bio-energy producer and has business interests in wood substitute materials, fertilizers and agriculture-related logistics.