Olam International, a leading global agri-business supplying food and industrial raw materials, on August 28 announced that it has entered into a strategic partnership with Mitsubishi Corporation of Japan as it raised new growth capital for the company.

Under the agreement, Olam will issue 332.73 million new shares to Mitsubishi at S$2.75 per share, representing about 12% of the enlarged issued and paid-up share capital, excluding treasury shares, of Olam raising S$915 million.

The share price represented a 29.3% premium over the weighted average share price for the 12 months preceding the date of the subscription agreement. The issue price, which was determined through a competitive bidding process, also exceeded the highest closing price in the preceding one-year period before the transaction announcement date.

In a separate and independent transaction, Mitsubishi will also acquire about 222 million secondary shares from the Kewalram Chanrai Group, a company belonging to Olam's founding family - equivalent to another 8% of Olam's enlarged issued and paid-up share capital. On completion of both these transactions, Mitsubishi will become Olam's second largest shareholder with a 20% stake in the company.

The partnership will allow Olam to expand access into the Japanese market through the proposed joint venture to distribute specific Olam products in the Japanese market, leveraging on Mitsubishi's strong distribution and retail presence as well as on Olam's deep origination expertise. They will also form a partnership committee to evaluate and develop future strategic collaboration opportunities in various Olam platforms.

For Mitsubishi, the transactions will enable them to gain strategic stake in a global, diversified and high growth agri-business company and gain exposure to multiple emerging high growth markets - a key focus area for the company. It will also expand Mitsubishi's access into overseas market to expand its production, processing and manufacturing business.

Temasek Holdings will remain Olam's biggest shareholder with a 51.4% controlling stake in the enlarged issued and paid-up share capital, excluding treasury shares, of the company upon completion of the subscription agreement, down from the current shareholding of 58.39%. The Kewalram Chanrai stake, on the other hand, will be reduced from 14.56% to 4.81%, post-transactions.

The partnership is based on a common view held by Olam and Mitsubishi about the long-term attractiveness of the food and agriculture sector. Both companies have a strategy of selectively integrating across the value chain in order to generate attractive returns and build long-term intrinsic value.