Olam Agri prepares for IPO with food security tailwind
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Olam Agri prepares for IPO with food security tailwind

If Olam Agri’s planned dual-listing IPO goes ahead in June it will have a bit of everything: a Singapore-Saudi listing, geopolitics and sovereign funds jostling to defend their nations against strain in global food security.

Photo: Reuters

If all goes well, a deal will hit the markets of Asia and the Middle East in June bringing together some of the defining themes of the day: food security, geopolitics and sovereign wealth.

The deal in question is the pending listing of Olam Agri, an agri-business subsidiary of Olam Group, the Singapore-based food commodity business. In January, Olam Group announced the potential listing as coming “as early as H1 2023”, and Euromoney understands it is mooted for June, though no prospectus has yet been issued, just briefing materials.

On its own merits, the deal is interesting. IPOs – Indonesia apart – are still in relatively short supply around the world, and this could be a big one: up to $1 billion.

Moreover, it is an interesting business, carved out as Olam’s wholly owned food, feed and fibre agri-business subsidiary. (Another business, ofi, was spun off as a wholly owned food ingredients subsidiary last year and is also expected to list.)

But the really interesting part is the detail. The announcement said that there would be a primary listing on the main board of Singapore Exchange, with a potential concurrent listing on the Saudi Exchange of the Kingdom of Saudi Arabia.

That is a first, and highly significant if it goes ahead, which Euromoney believes still to be likely.

Sovereign ownership

On the Singapore side, there has been a drought of big new listings in recent years beyond real-estate investment trusts, and this would be a very welcome exception. But doing Saudi at the same time is something very different. It would be the first truly global company to list in Saudi – the first non-GCC-incorporated business to do so, in fact.

And this is where the sovereign wealth funds come in. Olam Group is majority owned by Temasek, the Singapore sovereign vehicle. But Olam Agri also has another big shareholder, after a 35.4% stake in the company was sold to Salic, the Saudi Agricultural and Livestock Company, for $1.24 billion on a deal that was completed in December. Salic, in turn, is a unit of the Public Investment Fund, Saudi’s powerful and fast-growing sovereign wealth fund.

Sovereign funds have roles beyond investment: they are stewards of the nation’s wealth, and, particularly in oil-rich states, are intended to diversify away from hydrocarbons, sometimes catalysing new industries, sometimes defending a nation against the unforeseen.

And that is where Olam Agri is interesting. Saudi has oil in abundance, but what it absolutely does not have is long-term food security. It imports as much as 75% of its total food requirements and is going to need still more as its population grows, urbanizes and gains income.

Food security is at a pivotal, and frankly terrifying, point

A stake in a food commodity business, active from origination to processing to agricultural services, in more than 30 countries and handling 31 million tonnes of volume with more than 50 manufacturing and processing facilities, has an appeal to Saudi way beyond the financials.

Saudi is, of course, not the only nation or institution to be thinking in these terms. (Mitsubishi, also on the shareholder register and an active commodity trader for 150 years or so, will be interested in the food megatrend too.)

Food security is at a pivotal, and frankly terrifying, point. World hunger has been increasing for several years after a decade of progress in the opposite direction. War in Ukraine, the Covid pandemic and climate change have made existing problems worse. Yet at the same time, the proportion of funding going into agricultural research and development is declining, according to the food security group CGIAR.

Trade corridor

Geopolitics are in here too. Singapore has made a point of not having any enemies: it is why it became a natural choice to host the summit between then president Donald Trump and North Korea's leader Kim Jong Un in 2018. It has to balance being the most Western-familiar nation state in Asia with remaining on very good terms with China. In that context, closer ties with the Gulf states can’t hurt, while the trade flows between the two regions have grown to such an extent that it is now fashionable to talk of East-West Asia trade corridors, rather than Asia-Middle East.

The deal still has to fly in a fractious market: Morgan Stanley, Citi, DBS (part-owned, like Olam, by Temasek) and HSBC (a big name in Saudi) are the bookrunners tasked with making it do so. It will be helped by earnings before interest and taxes at Olam Agri rising at a 40.1% compound annual growth rate between 2019 and 2021.

But just as big a tailwind will come from the big idea: a company positioned to benefit from growing demand for food, feed and fibre, at exactly the time that strain on our food systems is flirting with catastrophe.

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