Olam International is thinking about raising around 2 billion pounds ($2.8 billion) through a London listing of its food ingredients unit one year from now, sources acquainted with the matter said on Friday, as the Singapore-based trading house tries to boost its valuation and move forward its acquisitions.
The company, one of the world’s greatest agricultural commodity traders, is listing Olam Food Ingredients (OFI) as a feature of a business redesign put in place last year to focus on the two core activities of OFI and Olam Global Agri (OGA) after the sale of sugar, rubber and different portfolios.
“It will be a significant Initial public offering. It will be among the bigger Initial public offerings done on the London Stock Exchange (LSE) in the last few years,” Co-founder and Chief Executive Sunny Verghese told reporters in a meeting, while at the same time declining to give a fundraising target.
The returns would permit OFI to speed up development and furthermore speed up acquisitions, he added.
“One reason that we are doing this activity of re-organizing is to ensure that we can focus and work on a genuinely different complex portfolio,” Verghese said
Singapore state investor Temasek Holdings turned into Olam’s controlling investor in 2014 after the trader’s accounting practices were flagged by short-dealer Muddy Waters in 2012. Mitsubishi Corp turned into an investor in 2015.
“London being a significant financial centre has no absence of liquidity and more critically has investors who realize how to value these things effectively,” said Justin Tang, head of Asian research at United First Partners in Singapore.
OFI’s portfolio includes cocoa, coffee, and edible nuts, while Olam Global Agri (OGA) contains grains, edible oils, rice, and cotton, among others.
OFI and OGA’s rivals include privately held Louis Dreyfus, Swiss-listed Barry Callebaut, and Archer-Daniels-Midland some of whom have reorganized their businesses in the midst of keen rivalry.
Olam’s shares which have a little buoy, wound up 2.8% on Friday, valuing the company at S$5.5 billion.
Verghese said OFI could join London’s FTSE-100 index of blue-chip companies.
A valuation of over 4 billion pounds would empower OFI to get into the index and get a superior listing – which would require the company to have a free buoy of essentially 25% and meet a tougher arrangement of corporate governance requirements.
Winning OFI’s listing would be a help for the LSE, which is attempting to draw in more global companies following Britain’s exit from the European Union.
Olam has said it is looking for a simultaneous secondary listing in Singapore for OFI by the first half of 2022.
Two of the sources said Olam had designated Citigroup, Credit Suisse, HSBC, JPMorgan, and Morgan Stanley to process OFI’s Initial public offering. Four of the banks declined to remark, while there was no reaction from Morgan Stanley.
Verghese said OFI’s Initial public offering could be concluded by the second quarter of the following year, and OGA could be listed ahead of schedule by the final quarter of 2022.
On Friday, Olam announced a 200% increase of first-half operational profit, excluding exceptional items, to a record S$436.6 million ($321.5 million)
