Olam Group to Repay $2 Billion in Debt

Singaporean conglomerate Olam Group plans to repay approximately $2 billion in debt, using the proceeds from the sale of a controlling stake in its agribusiness unit to reduce its debt burden, the company said.

Olam Group, which has earlier sold part of Olam Agri to Saudi Agricultural & Livestock Investment Company (SALIC), has sold the remaining 64.57% stake SALIC in February this year as part of its reorganisation plan.

The Singaporean firm has announced the next steps in its re-organisation plan to achieve three key objectives such as right-size the Remaining Olam Group’s capital structure by allocating approximately $2 billion to de-lever its balance sheet and make it debt-free and self-sustaining, invest $500 million of equity into Olam Food Ingredients (OFI) and continue to support various strategic initiatives to unlock its full potential value by exploring a concurrent listing in Europe and in Singapore and responsibly divest and monetise all of the remaining Olam Group’s assets and businesses over time and progressively distribute the net proceeds to shareholders via special dividends.

The updated reorganisation plan is to be financed from two main sources of funds that are expected to become available to the Olam Group.

The sources include gross cash proceeds estimated at $2.58 billion from the sale of 64.57% stake in Olam Agri and net sale proceeds from the divestment of assets and businesses in the remaining Olam Group.

Given the intended 100% sale of Olam Agri to SALIC and the plan to divest all the assets and businesses of the remaining Group over time, the Group’s focus will be to prioritise the value creation plan for OFI going forward.

In order to fully unlock value from the Group via the pursuit of the other interdependent initiatives, it is imperative for the remaining Olam Group to be debt-free and therefore self-sustaining on a stand-alone basis.

To that end, an allocation of approximately $2 billion is envisaged to be made towards de-leveraging the Remaining Olam Group. This would enable steps 2 and 3 of the updated reorganisation plan to be executed in an optimal manner.

Equity Investment in OFI

Since its formation in 2020, OFI has navigated various external challenges including COVID-19, the Russia/Ukraine conflict, volatile commodity prices, among others, while continuing to deliver on its medium-term earnings guidance of high single digit Adjusted EBIT growth, underscoring the resilience of its business model.

It has also been investing behind its planned strategy in a disciplined manner via a combination of organic and in-organic investments almost entirely focused on its Ingredients & Solutions segment as part of its journey towards becoming a more value-added food and beverage ingredients company.

This equity investment provides greater flexibility to pursue various strategic initiatives to unlock the full potential value of ofi for OGL’s shareholders via both private and/or public routes, for example exploring a concurrent listing in Europe and in Singapore at an appropriate time.

Monetising All Assets

The Olam Group has determined that the best course of action to achieve its overall objective to unlock full shareholder value would be via the orderly and responsible divestment and monetisation of the remaining Olam Group’s businesses and assets over time and to progressively distribute the net proceeds to shareholders via special dividends.

The updated reorganisation plan provides greater clarity on the steps to be taken to unlock value for the company’s shareholders and strikes an optimal balance between the need to strengthen the Group’s balance sheet and the resilience of its operating groups in the face of unprecedented macroeconomic uncertainties including tariffs, support continued profitable growth and return capital to shareholders.