Singapore-listed and headquartered Olam International plans to split its business into two new distinct operating groups focusing on food ingredients and the global agri-business.
Citing shifting consumer tastes, co-founder and Group CEO Sunny Verghese described the move as a simplification of businesses to capitalize on key market trends while continuing to leverage the integration of the Olam group.
Last year, keen to explore options that would unlock value over and above its own strategic plans, Olam appointed two independent financial advisors, namely Credit Suisse and Rothschilds, to conduct this exercise.
As a result, Olam is basing its deep business calibration on a pair of significant themes it has identified.
Specifically, these are that around the world more customers are moving towards healthier and sustainable food choices, while in Asia and Africa the burgeoning middle class is evolving from a carbohydrate-based diet towards a fat and protein diet.
The two newly carved out entities will be known as Olam Food Ingredients (OFI) and Olam Global Agri (OGA).
The OFI unit will concentrate on offering sustainable, natural, value-added food ingredients. This portfolio will be made up of cocoa, coffee, edible nuts, spices and dairy.
OGA will contain the global agribusiness with a unique focus on high-growth emerging markets. The coverage will encompass grains and animal feed, edible oils, rice, cotton, and commodity financial services.
Among the key takeaways the CEO highlighted for the move is his belief that the new dedicated units will be able to attract more investment that is directly focused and aligned with each of the businesses.
He also envisions potential IPOs for each new arm and assuming the new setup attracts investors as planned, the entities could be listed in about 36 months.
“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,” Verghese says.
He also emphasized that the reorganization to create the two distinct entities was not driven by cost savings or pressure but by the clear opportunity of the two themes.
At present, Singapore government investment fund Temasek Holdings is the major shareholder in Olam with a 53% stake. Verghese said he is confident that Temasek will stay invested as the plan is rolled out.