The strategic move comes after Olam reached an agreement in February to sell a controlling interest in its Olam Agri division to the state-owned Saudi Agricultural & Livestock Investment Co. (SALIC). The deal, valued at up to $2.58 billion, marks a significant step in Olam's ongoing corporate restructuring.
In an emailed statement, Olam confirmed that approximately $2 billion generated from this transaction is earmarked for de-leveraging its balance sheet. This substantial repayment is intended to make the core Olam Agri business "debt-free and self-sustaining," bolstering its financial stability and operational independence moving forward.
This focus on strengthening the balance sheet occurs amidst considerable volatility within global commodity markets. Olam, recognized as one of the world's leading merchants of cocoa and coffee, operates in sectors currently experiencing wild price fluctuations driven by deepening uncertainties surrounding international trade patterns and supply chain dynamics.
Beyond the debt reduction, Olam also outlined plans to inject $500 million of equity into its ingredients business, Olam Food Ingredients (ofi). The company maintains its long-term plan to pursue a concurrent public listing for ofi on exchanges in Europe and Singapore, stating this will occur "at an appropriate time," contingent on market conditions.
The recent developments are part of a larger strategic overhaul initiated by Olam's founder and Chief Executive Officer, Sunny Verghese, starting in 2020. The restructuring aims to ultimately split the group's diverse assets into distinct entities and list them separately to unlock greater value. Olam, whose majority shareholder is Singapore's state investment firm Temasek Holdings Pte., further indicated its intention to divest and monetize all remaining non-core assets over time.
The company stated that net proceeds realized from these future divestments will be progressively distributed back to its shareholders via special dividends, signalling a commitment to returning capital as the transformation plan unfolds. Monday's announcement and the positive market reaction suggest investor approval of Olam's strategy to create more focused, financially resilient businesses.