(Feb 24): Singaporean food trader Olam Group Ltd has reached a deal to sell a major stake in its agri-business unit to a state-owned Saudi Arabian investment firm that values the operations at US$4 billion (RM17.61 billion).

Olam Agri, which sells grains and seeds and makes everything from edible oils to pasta, is one of the main units in the group. The shares of Olam, one of the world’s biggest cocoa and coffee merchants, surged as much as nearly 9% on Monday, before paring almost half of that gain.

Saudi Agricultural & Livestock Investment Co, known as Salic and controlled by the kingdom’s sovereign wealth fund, will buy a 44.6% stake in Olam Agri Holdings for US$1.78 billion, giving it 80.01% of the unit, Olam said in an exchange filing on Monday. The Saudi firm has three years to exercise a call option on the remainder that it doesn’t own.

The unit was created in a rejig of Olam’s structure in 2020, and the company had previously pursued initial public offerings for it in both Singapore and Saudi Arabia. Regulatory bottlenecks delayed those plans, however, and in early 2022, Olam Group agreed to sell around a third to Salic, in a transaction that priced it at around US$3.5 billion.

The long-anticipated acquisition is a key milestone in the re-organisation of Olam, Sunny Verghese, the group’s chief executive, said in a statement.

The most recent deal now values Olam Agri at US$4 billion, 23% higher than the current market capitalisation of the group, the Singaporean company said. On completion of the 44.6% stake sale, Olam Group will realise an estimated gain on disposal of US$1.84 billion, it said.

The sale reflects Saudi Arabia’s increasing ambition in commodities beyond oil. The kingdom has been making efforts to lower its reliance on the petroleum sector and increase self-sufficiency and security of supply in areas like food and metals.

Olam could now focus its attention “on seeking strategic options to unlock value for the remaining Olam Group businesses” and the food ingredients part of the company that handles cocoa and coffee trading, Verghese said. The ingredients unit, known as ofi, was also created in 2020 and has been planning a primary listing on the London Stock Exchange.

Olam shares were trading at US$1.19 apiece as of 11.49am in Singapore.

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