June 1 (Bloomberg) -- Temasek Holdings Pte, Singapore’s state-owned investment company, agreed to buy a stake in Olam International Ltd., its first foray into commodities since naming Charles “Chip” Goodyear as chief executive officer- designate in February.

Breedens Investments Pte and Aranda Investments Pte, two Temasek subsidiaries, will pay S$437.5 million ($303 million) for 273.5 million new shares, or 13.76 percent, in Olam at S$1.60 apiece, the Singapore-based agricultural commodities supplier said in a statement. The price is 18 percent lower than the May 29 closing price of S$1.94.

Temasek is shifting to commodity investments after the global recession and credit crunch led to losses in financial assets. The fund sold at a loss that may total $4.6 billion its 3.8 percent stake in Bank of America Corp. in the first quarter.

“They’ll be taking a closer look perhaps at commodities; their primary emphasis will be on diversification,” said David Cohen, head of Asian economic forecasting at Action Economics in Singapore. “They were burnt by their exposure to the financials.”

Temasek is taking advantage of raw materials trading after the biggest monthly jump in commodities in 34 years. It named Goodyear, the 51-year-old former head of BHP Billiton Ltd., to take over in October from Ho Ching, wife of Singapore Prime Minister Lee Hsien Loong.

Olam advanced 11 percent to S$2.16 at the close in Singapore, valuing it at S$3.7 billion. The stock has gained 88 percent this year compared with a 35 percent climb in the benchmark Straits Times Index.

Emerging Markets

The value of Temasek’s assets fell 31 percent to S$127 billion in the eight months to Nov. 30 as the credit crisis drove down the value of stakes in Merrill Lynch & Co., Barclays Plc and Standard Chartered Plc. The MSCI World Index fell 38 percent in the same period.

Ho drove an expansion outside Singapore and increased financial assets to 40 percent of the company’s portfolio. Temasek’s investments in energy and resources accounted for 5 percent of its portfolio at the end of March last year.

Temasek, the owner of five of Singapore’s 10 largest companies by market value, is expanding in Asia while reducing exposure to developed economies, Ho said last month.

Commodities prices are showing signs of a rebound less than a year after the Reuters/Jefferies CRB Index of 19 raw materials began its plunge from a July 3 record, dropping as much as 58 percent by Feb. 24 as the global economy entered its first recession since the Great Depression. The index jumped 14 percent in May, the most since July 1974.

Commodities Focus

The Singapore fund would consider investments in resources as the sector provided a proxy for economic growth, especially in emerging economies in Asia and the rest of the world, Nagi Hamiyeh, managing director of investments in natural resources at Temasek, said on March 24.

Olam “will fulfill the targets that Temasek has, as far as return on investment,” said Chris Sanda, senior investment analyst at Daiwa Institute of Research in Singapore.

While Goodyear hasn’t made any official statements about his plans for Temasek, Melbourne-based BHP posted record profits and the company’s stock advanced almost 350 percent under his tenure as CEO of the world’s largest miner from 2003 to 2007.

China and India will lead the “next multi-decade” increase in commodity prices, he said in September at the CLSA Investors’ Forum in Hong Kong. He compared this period to the Industrial Revolution of the mid-18th century.

Supply Chain

The Olam investment gives Temasek an interest in the company’s “massive supply chain, which operates in 14 separate commodities,” Nirgunan Tiruchelvam, an analyst at Royal Bank of Scotland Asia Securities (Singapore) Pte, said by phone today.

Olam trades commodities including coffee, cocoa, rice, sugar, cotton, wood, nuts and spices.

Temasek will become the second-largest shareholder after Singapore-based Kewalram Chanrai Group. Temasek held a 4.9 percent stake in Olam between 2002 and 2006.

“We are investing in Olam because it fits well with our investment theme of supporting emerging global champions,” David Heng, Temasek’s managing director for investments in consumer and lifestyle, said in a statement today.

Expansion Plans

Olam plans to use the proceeds from the share sale to “strengthen its equity base” and assist in its “long-term growth and expansion,” the company said.

“We will put that money to work in the next three to six months,” Chief Executive Officer Sunny Verghese told analysts at a briefing in Singapore today, without elaborating.

Temasek’s investment allows the company to take on more debt to fund expansion and acquisitions, Verghese said.

“We have the capacity now to put up to $600 million of five-, seven-year money in place,” Verghese said. “We will choose to do it only when the pricing is favorable to us.”

The company may seek a “syndicated bank facility” of about $600 million once acquisition targets have been identified, Chief Financial Officer K. Ravikumar said in Singapore today.

“We will do it in phases, based on the transactions,” Verghese said, referring to the debt facility.

Temasek was founded in 1974 to foster development of the island’s banks, airlines and ports. It owns shares of the island’s biggest bank and its largest telephone company.

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Luzi Ann Javier in Singapore at ljavier@bloomberg.net

Last Updated: June 1, 2009 05:21 EDT