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Singapore's Olam eyes IPO of two new groups in business reshuffle

CEO says commodity trader aims to complete process within three years

Olam International CEO Sunny Verghese speaks at a briefing on Jan. 20 in Singapore. (Photo by Kentaro Iwamoto)

SINGAPORE -- Singapore-listed commodity trader Olam International said Monday it is considering an initial public offering of two new business groups that it will create as part of an organizational reshuffle.

The move to raise capital from outside investors is part of an effort to raise the company's corporate value, co-founder and CEO Sunny Verghese said in a briefing to media and analysts the same day. The reshuffle will fold its 12 business units into two larger groups, one focused on global agribusiness and the other on food ingredients. 

Olam has around 19,800 customers globally and operates in more than 60 countries, with a strong presence in Asia and Africa.

One business group, Olam Global Agri, will concentrate on grains and animal feed, edible oils, rice, cotton and commodity financial services. The other, Olam Food Ingredients, will specialize in cocoa, coffee, edible nuts, spices and dairy. Olam International will become a holding company.

The two new groups will consider soliciting investment from outside parties, as well as share offerings. This will generate "significant additional long-term growth capital" and increase Olam's long-term value, Verghese said.

He said the company will complete the reorganization in the first half of this year and begin publishing separate financial disclosures for the two groups. The IPOs are expected to take place within three years, Verghese said, but added that the new units may not seek outside investment.

Verghese said that seeking such investors is a "natural, logical progression and extension" of the reorganization. Olam is valued at about $6.3 billion Singapore dollars ($4.7 billion). The company did not comment on the estimated value of the two new groups.

The reorganization follows Olam's announcement last year of plans to sell off its rubber, sugar, wood products and fertilizer businesses. It had said these businesses do not offer long-term structural sustainability, citing environmental concerns and tightening regulations on sugar consumption.

Olam is majority-owned by Singapore's state investment company Temasek Holdings, with Japanese trading house Mitsubishi Corp. the second-largest shareholder. Olam had a net profit of SG$347 million in fiscal 2018, down from SG$580 million the previous year. It has not released its earnings for 2019.

Olam's shares rose 2% at one point in morning trade on Monday, but later gave up those gains to close unchanged from Friday's closing price of SG$1.94.

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