Olam splits businesses into 2 units

Commodity trader Olam International said yesterday that it would divide its portfolio of diverse products into two new operating businesses, with an intention to potentially spin out each unit and list them separately.

The decision follows a business review last year, and a multi-year plan announced early in 2019 to invest $3.5 billion into key growth areas, such as edible nuts, coffee and cocoa, while shedding other sectors.

One unit, Olam Food Ingredients (OFI), will consist of its cocoa, coffee, edible nuts, spices and dairy businesses, the Singapore-based company said in a statement. The other, Olam Global Agri (OGA), will include grains and animal feed, edible oils, rice, cotton and commodity financial services.

“We believe this will enable us to explore potential carve-outs and IPOs in a sequential manner and attract additional investors who are aligned with the vision of these two new groups,” chief executive officer Sunny Verghese said.

He said simplifying the businesses into two distinct groups would sharpen Olam’s focus to enhance growth and provide opportunities to capitalise on key market trends.

A potential listing of either division could take between 24 and 36 months, Verghese told a briefing.

Olam is closely held. Singapore state investor Temasek Holdings owns a little over 50%, and Japanese trading house Mitsubishi Corp has nearly 17%.

Verghese will take on the CEO role of Olam Global Agri on top of his position as CEO of Olam International, the parent company, which will also develop new businesses.

A. Shekhar will be CEO of the food ingredients business, stepping down as the Olam’s chief operating officer.

In the first year of its 2019-2024 strategic plan, the company sold assets worth $700 million, and invested more than $900 million in prioritised businesses, such as in Nigeria’s Dangote Flour Mills.