Olam International announced that Mitsubishi Corp will take a 20% stake in the company; this by subscribing for 332.7m new shares at S$2.75 each (12% of enlarged capital base) as well as buying 222m existing shares from founding Chanrai family (8%). The deal will also dilute Temasek’s stake in Olam from 58% to 51.4%. Note that the deal prices the offer at a premium of nearly 50% over the weighted average of S$1.84 on 26 Aug.

According to Olam, it also intends to form a JV with Mitsubishi. On the use of the proceeds, Olam plans to use S$913.5- 914.0m as capital to fund its growth and expansion of its businesses; about S$1.0-1.5m to pay the estimated professional fees. We will have more after the analyst briefing later. For now, we place our Hold rating and S$1.88 fair value under review.

Source: OCBC Research - 28 Aug 2015