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: Quote) 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