India, Feb. 25 -- Olam Group Limited ("OGL") has announced the proposed sale of its remaining 64.57% stake in Olam Agri Holdings ("Olam Agri") to Saudi Agriculture & Livestock Investment Company ("SALIC") in a two-tranche transaction, valuing Olam Agri at an implied 100% equity valuation of US$4.00 billion.

Under this agreement:

Tranche 1: OGL will sell 44.58% of its stake in Olam Agri to SALIC for approximately US$1.78 billion, giving SALIC a controlling 80.01% stake in Olam Agri.

Tranche 2: OGL will retain a 19.99% stake, with a put option allowing it to sell this stake to SALIC three years after Tranche 1 completion, at the Closing Valuation plus 6% IRR. SALIC will also have a call option to acquire this stake within the same period.

This transaction represents a 14% premium over SALIC's initial acquisition price when it purchased a 35.43% stake in Olam Agri in December 2022, and a 3.47x price-to-book value multiple based on Olam Agri's US$1.15 billion book value (as of December 31, 2023).

The sale is expected to generate a total gross cash proceeds of US$2.58 billion (S$3.41 billion) from both tranches, with OGL realizing an estimated gain of US$1.84 billion upon completion of Tranche 1.

Strategic Impact and Future Outlook

This transaction is a significant milestone in Olam Group's Re-organisation Plan, allowing OGL to focus on unlocking value for its remaining businesses, including pursuing an IPO for ofi (Olam Food Ingredients).

OGL's co-founder and group chief executive officer, Sunny Verghese said,"Since SALIC's investment in Olam Agri in 2022, our partnership with SALIC has unveiled new avenues of growth. With its strategic mandate as a global agrifoods investor and related complementary strengths, SALIC and Olam Agri share the same vision and focus on sustainable sourcing and commitment to meet the rising demand for food, feed and fibre. Importantly, this transaction is transformative for Olam Agri.

"The sale of Olam Agri to SALIC marks another key milestone in Olam's Re-organisation journey announced in January 2020. With this transaction, we can now focus our attention on seeking strategic options to unlock value for the Remaining Olam Group businesses andofi, including the pursuit of anofiIPO."

Group chief executive officer of SALIC, Sulaiman AlRumaih said,"The full acquisition agreement of Olam Agri aligns with SALIC's strategic objectives of diversifying sources of essential commodities, strengthening supply chain integration, and enhancing logistical efficiency across its local and international investments. Furthermore, this acquisition underscores SALIC's ambition to secure a key position in the global grains sector."

"Olam Agri, a global player in trading essential commodities, aligns with SALIC's strategic investment approach, which prioritizes high-potential companies addressing future food security needs through innovation and integrated supply chains both locally and globally. We are confident that this partnership will contribute to achieving national and global objectives while continually enhancing production efficiency for the benefit of all stakeholders."

Upon completion of Tranche 2, Olam Agri will be fully owned by SALIC, while OGL will continue to hold a 100% stake in ofi and the Remaining Olam Group. The transaction is subject to shareholder and regulatory approvals, with Tranche 1 expected to close in Q4 2025.

Published by HT Digital Content Services with permission from FoodTechBiz.