Olam International is considering raising about £2 billion ($2.8 billion) through a London listing of its food ingredients unit next year, sources familiar with the matter said on Friday, as the Singapore-based trading house seeks to boost its valuation and step up acquisitions.
The company, one of the world's biggest agricultural commodity traders, is listing Olam Food Ingredients (OFI) as part of a business overhaul flagged last year to focus on the two core businesses of OFI and Olam Global Agri (OGA) after the sale of sugar, rubber and other portfolios.
"It will be a substantial IPO. It will be amongst the larger IPOs done on the London Stock Exchange (LSE) in the recent past," co-founder and CEO Sunny Verghese told Reuters in an interview, while declining to give a fundraising target.
The proceeds would allow OFI to accelerate growth and also accelerate acquisitions, he added.
"One of the reasons that we are doing this exercise of re-organising is to make sure that we can focus and simplify a fairly diverse complex portfolio," Verghese said
Singapore state investor Temasek Holdings became Olam's controlling shareholder in 2014 https://www.reuters.com/article/us-olam-temasek-idUSBREA2C2EW20140314 after the trader's accounting practices were questioned by short-seller Muddy Waters in 2012. Mitsubishi Corp became a shareholder in 2015.
"London being a major financial centre has no lack of liquidity and more importantly has investors who know how to price these things correctly," 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) comprises grains, edible oils, rice and cotton, among others.
OFI and OGA's competitors include privately-held Louis Dreyfus, Swiss-listed Barry Callebaut and Archer-Daniels-Midland, some of whom have revamped their businesses amid stiff competition.
Olam's shares, which have a small float, ended 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 Premium Listing
A valuation above £4 billion would enable OFI to get into the index and obtain a premium listing - which would require the company to have a free float of at least 25% and meet a tougher set of corporate governance requirements.
Winning OFI's listing would be a boon for the LSE, which is trying to attract more global companies following Britain's exit from the European Union.
Olam has said it is seeking a concurrent secondary listing in Singapore for OFI by the first half of 2022.
Two of the sources said Olam had appointed Citigroup, Credit Suisse, HSBC, JPMorgan and Morgan Stanley to work on OFI's IPO. Four of the banks declined to comment, while there was no response from Morgan Stanley.
Verghese said OFI's IPO could be completed by the second quarter of next year, and OGA could be listed as early as the fourth quarter of 2022.
On Friday, Olam reported a more than doubling of first-half operational profit, excluding exceptional items, to a record S$436.6 million ($321.5 million)
In April, Olam had said that new European Union legislation aimed at preventing the import of commodities linked to deforestation and human rights abuses might force it to stop using some of its cocoa suppliers.
News by Reuters, edited by ESM. For more Supply Chain stories, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.