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Business deals

Singapore's Olam buys US spice producer Olde Thompson for $950m

Deal completes supply chain for commodities trader as demand grows amid pandemic

Olam already supplies ingredients like dried onion, garlic and tropical seeds that were produced in India, Vietnam and China to Olde Thompson. (Photo is a screenshot from Olde Thompson's website spliced with a Reuters photo) 

SINGAPORE -- Singapore-based agricultural commodities trader Olam International will acquire a U.S. manufacturer of spices and seasonings for $950 million, the company said Thursday, as it hopes to capture growing demand there by creating an end-to-end supply chain.

Olam will buy all the shares of California-headquartered Olde Thompson by the end of June. Olde Thompson is currently 75% owned by Kainos Capital, a U.S. private equity fund, and the rest by the founding family.

Spices are among Olam's key trading products, including rice, cacao, coffee and cotton. Olam is already a major supplier to Olde Thompson of ingredients like dried onion, garlic and tropical seeds produced in India, Vietnam and China.

Demand for spices has grown during the pandemic due to more home-cooking. In addition, products such as herbs are becoming more popular among health-conscious consumers who use them to replace salt and sugar. Consumers are also becoming more adventurous and trying out different cuisines, which has led to a rise in demand for spices.

Founded in 1944, Olde Thompson's products include garlic pepper, pink salt and organic chili powder -- high-end products typically packaged in small tins and sold in supermarkets. Olam said that the U.S. company has "a significant formulation, blending, packaging and distribution capacity" to serve customers in the country.

The acquisition will make Olam "a very unique, differentiated end-to-end spice solution provider to the U.S.," said A. Shekhar, CEO of Olam Food Ingredients, a group unit, during a teleconference on Thursday. He said the deal will enable it to conduct its business in "a far more integrated manner, providing full transparency across the chain to the retail customers."

According to Olam, the U.S. spices market turned over $5.4 billion in sales in 2020, a compound annual growth rate of 4% between 2015 and 2019. The growth rate was even higher for branded spices.

Olam sees synergies between Olde Thompson and its existing businesses. With this deal, Olam could expand its supply chain -- from procurement of raw materials to the manufacture of end-products. It can also sell Olam's existing products through Olde Thompson's sales channel, and vice versa. Olam already has supply chains spanning more than 60 countries.

"Combination of [Olam's] back-end strengths in global origination and innovation across the value chain, and Olde Thompson's front-end capabilities to provide retail spice solutions will offer differentiated value to our customers," the company said.

The acquisition comes amid rising prices of food and other commodities as the global economy emerges from the devastating effects of the pandemic. Apart from seizing such opportunities, the deal also adds value to Olam Food Ingredients, which Olam plans to list by the first half of 2022.

"Growing our offerings of private-label (branded) solutions is right at the heart of OFI's strategy -- and within that spice is one of the most attractive and growing categories, especially in the U.S.," said Shekhar in a statement. "This will enable us to offer consumers a comprehensive range of bold, authentic, natural taste and flavors with end-to-end traceability."

Olam has not disclosed any financial information about Olde Thompson, but it said the acquisition would add about $80 million to its earnings before interest, tax, depreciation and amortization. It said it could also save $25 million to $30 million a year through the optimization of logistics and other operations.

Singapore-listed Olam shares rose 0.6% by midafternoon to 1.75 Singapore dollars per share. Its market capitalization is about SG5.7 billion ($4.3 billion). Its total revenue and net profit for 2020 was SG$35.8 billion and SG$245 million, respectively.

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