Olam International Ltd. (OLAM), the commodities trader part-owned by Temasek Holdings Pte., is raising $600 million in a share sale to fund acquisitions, three people with direct knowledge of the transaction said.
The company will offer $200 million of the new shares to investors at S$2.60 apiece and a separate $200 million to Temasek, Singapore’s state investment company, at the same price, the people said. A further $200 million will be sold to existing shareholders at S$2.56 a share, they said, declining to be identified as the information isn’t public. The lower price is a 9.5 percent less than the last traded price of S$2.83 before the trading halt today.
“Olam has been raising money quite frequently over the last few years and I am not sure the market will like this latest news,” James Koh, an analyst with Kim Eng Holdings Ltd. in Singapore, said today by phone.
Olam, one of the world’s top three suppliers of rice, cocoa and coffee, is expanding into sugar milling and urea plants in Africa and dairy farming in Latin America. The company aims to transform itself from a trading house to one with production assets to earn bigger margins.
The 12.95 percent stake held by Temasek is expected to increase after the share purchase, the people said, without being more specific. The funds will also be used for working capital, the people said. An Olam official, who asked not to be named because of company policy, couldn’t immediately comment. Jeffrey Fang, a spokesman for Temasek, declined to comment.
Olam is offering to pay as much as 364 basis points more than the London interbank offered rate for a $1.25 billion loan facility, according to another person familiar with the matter. The company has given banks until July 4 to respond, the person said, asking not to be identified as the details are private.
“It seems like the loan will be used to refinance existing debt,” Kim Eng’s Koh said. “Over the last few years they have been transforming from a pure trader into a company which also owns operating assets, and that requires a longer-term debt structure.”
Olam, which is building a $1.3 billion fertilizer plant in the Republic of Gabon, is expanding its assets with palm-oil plantations, sugar refineries and wheat milling to meet African and Asian demand for commodities. It has $2.2 billion of loans maturing before the end of 2017, according to data compiled by Bloomberg.
The share sale may be put toward the Gabon urea project, Koh said. Olam’s share is about $800 million, he said.
Olam has said it plans to move into farming of cashews, spices, dehydrates, grains and sugar by 2015. The company last month reported a 43 percent jump in third-quarter profit, to S$127.3 million ($103.6 million), on rising sales and widening margins. Revenue surged 75 percent to S$4.74 billion.