Key Takeaways
- Saudi Agriculture & Livestock Investment Company (SALIC) will acquire a 44.58% stake in Olam Agri Holdings for approximately $1.78 billion (S$2.35 billion) in Tranche 1, increasing its total ownership to 80.01%.
- Olam Group Limited (OGL) will retain a 19.99% stake, with an option to sell it to SALIC (Tranche 2) after three years. SALIC also has a call option to acquire this stake within the same timeframe.
- The total equity valuation of Olam Agri is estimated at $4.00 billion, reflecting a 14% increase from its 2022 valuation.
- OGL expects to realize an estimated $1.84 billion gain on disposal and raise a total of $2.58 billion in gross cash proceeds from Tranche 1 and Tranche 2.
- The proceeds may be allocated toward debt repayment, capital structure adjustments, and a potential special dividend distribution.
- The transaction is subject to shareholder and regulatory approvals, with completion expected in Q4 2025.
Overview of the Transaction Between Olam & SALIC
Olam Group Limited (OGL) has announced an agreement to sell a 44.58% stake in Olam Agri Holdings to SALIC, the food and agriculture investment arm of Saudi Arabia’s Public Investment Fund (PIF), for $1.78 billion. The acquisition will increase SALIC’s stake in Olam Agri to 80.01%.
Upon completion of Tranche 1, OGL will retain a 19.99% stake in Olam Agri with an option to sell it to SALIC (Tranche 2) after three years. SALIC also has a call option to acquire the remaining stake within the same timeframe.
The transaction values Olam Agri at $4.00 billion, representing:
- A 23% increase from OGL’s market capitalization of $3.25 billion.
- A 14% increase from the $3.50 billion valuation in 2022 when SALIC acquired an initial 35.43% stake in Olam Agri.
- A 3.47x price-to-book ratio, based on Olam Agri’s $1.15 billion book value as of December 31, 2023.
Financial Impact and Use of Proceeds
Upon completion of Tranche 1, OGL expects to:
- Recognize a gain of $1.84 billion, which will contribute to its equity reserves.
- Raise an estimated $2.58 billion in total proceeds from the sale of Tranche 1 and Tranche 2.
OGL’s board will determine how to allocate the proceeds based on factors such as:
- Future earnings and cash flow requirements.
- Debt repayment and capital restructuring.
- Potential distribution of a one-time special dividend.
If OGL completes Tranche 2, the total divestment of Olam Agri will generate $3.87 billion in gross proceeds, with a total gain of $2.72 billion added to the company’s equity reserves.
Strategic Rationale for the Acquisition
Olam Agri’s Growth Potential and Market Position
Olam Agri operates as a global agribusiness focused on food, feed, and fiber, with a presence in high-growth consumption markets. In 2023, Olam Agri:
- Handled over 39 million metric tonnes of agricultural products.
- Generated S$31.3 billion in revenue.
- Reported S$967.7 million in earnings before interest and tax (EBIT).
According to Sunny Verghese, Co-Founder and Group CEO of OGL, “The sale of Olam Agri is a significant milestone in our re-organization strategy. It allows us to focus on unlocking value for the remaining Olam Group businesses and explore strategic options, including an IPO for ofi.”
SALIC’s Investment Strategy and Food Security Goals
SALIC, established in 2009 as Saudi Arabia’s food and agriculture investment arm, focuses on enhancing global and domestic food security. The acquisition aligns with its objective of:
- Diversifying food supply sources and strengthening supply chain integration.
- Expanding its presence in global grain and essential commodity markets.
- Enhancing agricultural productivity and sustainability.
Sulaiman AlRumaih, CEO of SALIC, stated, “Olam Agri fits well with SALIC’s long-term investment strategy. This acquisition strengthens our position in the global grains sector and contributes to national and international food security objectives.”
Regulatory Approvals and Timeline For The Transaction Between SALIC & Olam
The completion of Tranche 1 is subject to:
- Shareholder approval by OGL.
- Regulatory clearances.
- Customary closing conditions.
The transaction is expected to close in Q4 2025, with a potential follow-up divestment of the remaining 19.99% stake (Tranche 2) on the third anniversary of Tranche 1.
