Temasek-led group offers $2.1 billion for remaining Olam shares

Fri Mar 14, 2014 12:06am EDT
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By Rachel Armstrong and Michael Flaherty

SINGAPORE/HONG KONG (Reuters) - A Temasek-led shareholders group has offered to pay $2.1 billion in cash for shares in Olam International Ltd OLAM.SI they don't already own, putting the heft of the Singaporean state investor behind the commodity trading firm's weak balance sheet.

The proposal comes after a tumultuous stretch for Olam, one of the world's leading traders in rice, coffee and cocoa, that saw it come under attack from short-seller Muddy Waters in late 2012 for its accounting practices.

Olam denied the short-seller's claims, gained financial support from Temasek TEM.UL and drew up a plan to cut capital spending and debt. Its stock surged some 40 percent since late January prior to the offer announcement.

A deal would also be in keeping with Temasek's TEM.UL recent pattern of increasing the unlisted portion of its $170 billion portfolio of companies.

A Temasek unit, Breedens Investments, is leading a consortium that includes Aranda Investments and members of Olam's executive committee, which collectively own 52.5 percent of the commodities trader.

The offer price of S$2.23 per share represents an 11.8 percent premium over Olam's last traded price and values the company at $4.3 billion. The deal also includes an offer to buy outstanding convertible bonds and warrants. Olam's shares rose to S$2.21 after the announcement.

"A takeover will put Temasek's AAA rating squarely behind Olam and hopefully allow them to repair their weak financials." said Michael Dee, a former senior managing director at Temasek Holdings.

Dee noted that Olam continues to be over-leveraged and that last year's rights offering to Temasek and others had only added more debt and interest expenses.   Continued...

A man walks past a logo of Olam International Limited at its office in Singapore November 29, 2012. REUTERS/Edgar Su