“Exploring potential carve-outs and IPOs”: Olam reorganization divides businesses

20 Jan 2020 --- Global food and agri-business Olam International (OIL) is moving forward with its strategy to unlock and maximize the company’s long-term value by reorganizing the business into two new distinct operating groups focusing on food ingredients and global agri-business. Olam will reorganize its diverse business portfolio to create two new coherent operating groups that are well-positioned for further growth in line with key consumer trends and market opportunities. 

One of the new groups, Olam Food Ingredients (OFI), offers sustainable, natural, value-added food products and ingredients for healthy and indulgent products. It consists of Olam’s businesses of Cocoa, Coffee, Edible Nuts, Spices and Dairy. OFI has built a global value chain presence including its own farms, farm-gate origination and manufacturing facilities. 

OFI partners with customers, leveraging its complementary and differentiated portfolio of “on-trend” food products to co-create solutions that anticipate and meet changing consumer preferences. This is as demand increases for healthier food that is traceable and sustainable.

Meanwhile, Olam Global Agri (OGA) operates in high-growth Asian and African countries supplying food, feed and fiber to meet rising demand and a shift to protein-based diets. This group includes the differentiated businesses of Grains and Animal Feed, Edible Oils, Rice, Cotton and Commodity Financial Services.

OGA has built proprietary operating capabilities including significant strengths in global origination, processing, trading, logistics, distribution, farming and risk management. It also boasts a deep understanding of the market via on-the-ground presence in these emerging markets for over 30 years.

A “bold plan”
The company describes this move as a “bold plan” that will enable it to explore options to maximize Olam’s long-term value over and above the strategic plan via potential carve-out and capital raising options, including IPO listing for OFI and OGA. 

OIL, as the parent company of OFI and OGA, will play a key role in unlocking the full value of the Olam Group by providing stewardship to the new operating groups and accelerating growth.

Olam will ensure the continuity of the “Olam Way”, including its entrepreneurial culture, implement cross-cutting initiatives such as AtSource, and drive key enablers such as sustainability, operational excellence and digital transformation. It will also offer shared services to OFI and OGA to optimize synergies, notes the company. 

Olam says it will also nurture gestating businesses to full potential, including Packaged Foods, Infrastructure & Logistics and Olam Palm Gabon, as well as incubate new engines for future growth. In addition, it will manage the responsible divestment of non-core assets and businesses identified in the strategic plan and redeploy capital for further growth. 

Personnel changes
A Shekhar has been appointed as the CEO of OFI and will, therefore, step down from his current role as Group Chief Operating Officer of Olam. Sunny Verghese will hold charge as CEO of OGA and Olam International, in addition to continuing as Group CEO.

“Over the past 30 years, Olam has built a valuable portfolio of businesses that have achieved leadership positions. By simplifying our businesses across two distinct and coherent groups, each with a clear vision for profitable growth, it sharpens our focus and provides opportunities to capitalize on key market trends, while continuing to leverage the benefits of the Olam Group,” explains Verghese.

“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 in order to maximize the value of our business.” 

“The Board of Directors, building in part on the recommendation from the two independent financial advisors, believes that the reorganization will enable each operating group to pursue its own vision, take advantage of new market opportunities, optimize resources and attract new talent. The Board has every confidence that this significant step forward will allow the company to strengthen and capitalize on its strong foundation to achieve higher growth and value creation, which we believe will be welcomed by our stakeholders,” adds Chairman of the Board, Lim Ah Doo.

As the reorganization progresses, the company will provide periodic updates to stakeholders on the process and related developments, including changes in operational and financial reporting in line with the new structure.

Edited by Gaynor Selby